Browsing: Data Science & AI

Data Science & AI

The Fintech M&A Market Hasn’t Peaked—Yet

Sep 22nd, 2019 | Filed under: Data Science & AI, State of the Industry, Access to Alternatives, Featured Post, Newly Added

A new report seeks to “take the temperature” of the mergers and acquisitions activity in fintech, looking at input from 100 senior executives from banks, asset managers, fintech businesses, PE and VC firms active in this space. There are a lot of potential acquirers, along with some who may haveRead More


Whatfore Art Thou Use of Alt-data?

Aug 26th, 2019 | Filed under: Data Science & AI, State of the Industry, Newly Added, Asset Allocation, What About Beta?

Shakespeare’s Juliet once famously asked “what’s in a name?” If you know the play, she was talking about roses and how they would smell as sweet, even if they had an alternative name. Would her modern-day self not ask the same about data? And what makes today’s alt-data different fromRead More


QUANT STRATEGIES: THEORY VS. REALITY

Aug 11th, 2019 | Filed under: Data Science & AI, State of the Industry, Access to Alternatives, Featured Post, Newly Added, Asset Allocation, Hedge Funds

By Nicolas Rabener of FactorResearch (@FactorResearch) INTRODUCTION When pitching an investment product with a backtested history the frequent response from potential investors is that they have never seen a bad backtest. Naturally this is true as there is no point in marketing a strategy with a poor backtest as investorsRead More


Tick Size and High-Frequency Trading

Jul 15th, 2019 | Filed under: Data Science & AI, State of the Industry, Featured Post, Newly Added, Asset Allocation

A lot of hopes have been placed on changes in market tick sizes. In the 1990s there was a big push to reduce the tick sizes of securities, allowing them to get down to one cent or fractions thereof. In the new millennium came a sense of regret. Observers suspectedRead More


Quantum Computing Will Mess Up all Expectations

Jul 11th, 2019 | Filed under: Data Science & AI, State of the Industry, Featured Post, Newly Added, Asset Allocation, Risk Management

There are reports that Google is preparing an announcement of “quantum supremacy” for later this year. If true, this is the biggest tech story since the transistor replaced vacuum tubes. It could be a disruptive development for just about every business with an IT department. Among much else, quantum supremacyRead More


ICE Futures Gets Its Speed Bump

Jun 4th, 2019 | Filed under: Data Science & AI, State of the Industry, Newly Added, Asset Allocation, Commodities & Natural Resources

On Feb. 1, ICE Futures US Inc., informed the Commodity Futures Trading Commission that it was instituting a new “speed bump,” formally called the Passive Order Protection (or POP) Functionality for its gold daily and silver daily futures markets. The idea of POP is to limit the advantage that canRead More


Interest Rate Derivatives, Announcements and HFT: It’s All About Timing

May 23rd, 2019 | Filed under: Data Science & AI, State of the Industry, Featured Post, Newly Added, Hedge Funds

Three scholars associated with the University of Wollogong, Australia, recently published a paper on the contribution of high-frequency traders to the absorption of new information by the markets, especially in relation to the prices of interest rate derivatives. The study is the work of Alex Frino, Michael Garcia, and IvyRead More


A Fintech Revolution in Commercial Real Estate

May 9th, 2019 | Filed under: Data Science & AI, State of the Industry, Featured Post, Real Estate, Newly Added, Commodities & Natural Resources

Cushman & Wakefield, Chicago, has released a discussion of blockchains in connection with real estate. The paper argues that the technology could “transform CRE transactions ranging from property listings, asset management, and the purchase and sale of properties.” It reminds us that blockchains are shared digital ledgers, both tamper-proof andRead More


Ramsay on the Stay of the TFP: Reform will Proceed

Apr 9th, 2019 | Filed under: Data Science & AI, State of the Industry, Featured Post, Newly Added, Asset Allocation

The Securities and Exchange Commission recently imposed a stay on part of its transaction fee pilot (TFP). There is understandably a good deal of debate about the significance of this stay. The TFP, initiated in December 2018 with the expectation that it would run for at least one year, andRead More


High-Frequency-Trading Firms: Fast, Faster, Fastest

Apr 2nd, 2019 | Filed under: Data Science & AI, State of the Industry, Featured Post, Newly Added, Asset Allocation, Hedge Funds

Many high-frequency trading (HFT) firms have disappeared into larger firms as merger activity has increased recently. Those acquired include Chopper, Infinium, Teza, RGM Advisors, and Sun Trading. It also includes Getco, the Chicago-based firm founded in 1999 by two former floor traders that almost defined the field for some time.Read More


Are Data Scientists the ‘New’ Rockstars?

Mar 21st, 2019 | Filed under: Data Science & AI, State of the Industry, Newly Added, Risk Management

Daniel Hill, a research analyst for the global equity team at William Blair, has written an insightful piece about the hot competition for data scientists underway in the alpha-seeking world today.  Hill begins with the observation that there are lots of different buzzwords, hashtag-worthy words and phrases, at use inRead More


Bayesian Probability Theory and a Hierarchical Learning Portfolio

Mar 19th, 2019 | Filed under: Data Science & AI, State of the Industry, Featured Post, Newly Added, Asset Allocation

Two scholars working with Bayesian probability theory recently published a fascinating discussion of market timing and portfolio efficiency. They have proposed what they call a “hierarchical ensemble learning portfolio.” Yes, that sounds rather heavy on the jargon. We’ll break it down a bit in what follows. The authors of theRead More


Algorithms Moving into the Bond Markets

Mar 17th, 2019 | Filed under: Data Science & AI, State of the Industry, Featured Post, Newly Added, Risk Management

Algorithmic trading may fairly be said to have conquered the public equities world, although there are still pockets of resistance and related controversies. The robots have now turned their attention to the bond markets. Bond markets are different from stock markets in a lot of ways, and many of theseRead More


Transaction Fees: Market Structure Goes to Court

Feb 26th, 2019 | Filed under: Data Science & AI, State of the Industry, Featured Post, Newly Added, Asset Allocation

The NYSE, on Thursday, Feb. 14, Nasdaq, and Cboe Global Markets (the following day) have united to bring lawsuits against the Securities and Exchange Commission to stop its transaction fee pilot. These are the three largest US equity exchanges and their attitude toward their regulator is usually one of cooperation.Read More


Assessing Risk Measurement for a Portfolio of Hedge Funds

Jan 27th, 2019 | Filed under: Data Science & AI, State of the Industry, Featured Post, Newly Added, Risk Management, Hedge Funds

Two scholars, Shubeur Rahman and Ranjan Bhaduri, have in a new paper taken a fresh look at a long-standing dilemma in the alternative investments industry. The question is: how should investors in hedge funds (especially in a multi-asset class, multi-strategy portfolio of hedge funds) measure the market risk inherent inRead More


Risks & Rewards: The Future of Finance in Blockchain

Jan 6th, 2019 | Filed under: Data Science & AI, Emerging Asset Classes, State of the Industry, Access to Alternatives, Featured Post, Newly Added, Asset Allocation, Risk Management

A new article by Dave Dowsett and Heather Wied, both of Invesco, looks at blockchains and the way this new technology, precisely as it divorces itself from its original significance as a feature of the cryptocurrencies, is ready to transform finance. Dowsett and Wied contend that blockchain “offers the possibilityRead More


Digitization of alternative investments: the rise of technology

Nov 20th, 2018 | Filed under: Data Science & AI, State of the Industry, Featured Post, Private Equity, Newly Added, Risk Management, Hedge Funds

KPMG, the auditing giant based in the Netherlands, has put out a white paper on the “digitization mandate” in the alternative investment space.  It maintains that fund managers who “dawdle” in digitizing their business are acting foolishly, falling behind the expectations of their actual and potential investors. Consider fees. PreqinRead More


A Brief History of Asset Allocation

Oct 16th, 2018 | Filed under: Data Science & AI, Emerging Asset Classes, State of the Industry, Featured Post, Newly Added, Asset Allocation, Risk Management, Hedge Funds

Glassbridge has put out an ambitious white paper about the “evolution of asset allocation across the investment management industry,” one that begins with the basics of the Capital Asset Pricing Model and ends with quantitative analysis and crowdsourcing. The premise is that new strategies, and new ranges of data, areRead More


National Market System: What to End; What to Mend

Oct 14th, 2018 | Filed under: Data Science & AI, State of the Industry, Access to Alternatives, Featured Post, Newly Added, Asset Allocation, Commodities & Natural Resources

The Principal Traders Group of the Futures Industry Association (FIA PTG) recently offered its thoughts on market structure, outlining one direction of reform for the Securities and Exchange Commission’s Reg NMS. Reg NMS (National Market System) was promulgated in 2005, in order to ensure competition among markets, and in theRead More


Inaccurate News Analytics: When Robots Get Things Wrong

Aug 28th, 2018 | Filed under: Data Science & AI, State of the Industry, Featured Post, Newly Added, Asset Allocation, Hedge Funds

A new study prepared for the Federal Reserve Board looks at the use of algorithms to read and interpret financial news. While there have been a lot of studies that have looked at this topic, one unique feature of this new paper, “First to ‘Read’ the News,” is that itRead More


Neural Networks and EPS Prediction

Jul 12th, 2018 | Filed under: Data Science & AI, State of the Industry, Featured Post, Newly Added, Risk Management

Yes, it sounds a bit like the phrase “jumbo shrimp,” in terms of sense, but a “long short-term memory neural network” is an important recent advance in artificial intelligence research. The term refers to a neural network devised with “forget gates” attached to cells of memory, originally in order toRead More


Quants and Fundamentalists Unite!

May 31st, 2018 | Filed under: Data Science & AI, State of the Industry, Featured Post, Newly Added, Hedge Funds

By standard definition, a “quantitative” investing strategy is one that selects securities using customized models, often algorithm-driven and thus on the operational level independent of human judgment. Again working from standard definitions, a “fundamental” investing strategy involves an examination of whether the entity issuing a security (corporation, sovereign, or other)Read More


What Makes Big Data So … Big?

Mar 22nd, 2018 | Filed under: Data Science & AI, Featured Post, Newly Added, Asset Allocation

The term “big data” has become a cliché. One has to remind one’s self that it is a somewhat ill-fitting label. What is new about the world of data isn’t that there is a lot of it; nor that on the software end the processing of data becomes easier overRead More


PwC Charge: Asset Managers are Digital Tech ‘Laggards’

Nov 30th, 2017 | Filed under: Data Science & AI, State of the Industry, Featured Post, Manager Selection, Newly Added, Hedge Funds

A new paper from PricewaterhouseCoopers on the coming transformations in the asset and wealth management industries says that firms in this market must adapt or die. And the adaptation the authors have in mind isn’t just the usual Darwinian metaphor – managers must “become business revolutionaries, even disruptors” in orderRead More


Algorithmic Traders: Proprietary, Agency, Liquidity

Nov 9th, 2017 | Filed under: Data Science & AI, Featured Post, Newly Added, Asset Allocation

Two scholars affiliated with the Indian Institute of Management, in Calcutta, have posted a paper about the effects of algorithmic trading on liquidity. This paper, by Samarpan Nawn and Ashok Banerjee, based on the first chapter of Nawn’s Ph.D. dissertation, distinguishes sharply between proprietary algorithmic traders and agency algorithmic traders,Read More


AIMA’s New Due Diligence Template

Oct 22nd, 2017 | Filed under: Data Science & AI, Featured Post, Manager Selection, Newly Added, Risk Management

It has been 20 years since the Alternative Investment Management Association published its first due diligence questionnaire, a template designed to standardize the diligence process by which investors decide if a particular management is right for them. Now it has published a new questionnaire/template, covering a broader range of entities/strategies.Read More


AIMA and SGPS on Managed Futures and CTAs

Sep 28th, 2017 | Filed under: Data Science & AI, State of the Industry, Featured Post, Newly Added, Asset Allocation, Hedge Funds, Commodities & Natural Resources

The Alternative Investment Management Association and Societe Generale Prime Services have together put out a white paper about managed futures funds and the commodity trading advisers who manage them. A key themes of the paper is that managed futures strategies aren’t as risky as are typical investments in equity markets.Read More


High-Frequency Trading and Spoofing   

Aug 31st, 2017 | Filed under: Data Science & AI, Featured Post, Newly Added, Asset Allocation, Risk Management, Commodities & Natural Resources

Six years ago Michael Coscia placed orders through the CME Group’s Globex platform via a trading algorithm that amounted to “spoofing.” He placed both large and small orders in the copper market, for example, with the large orders (cancelled within milliseconds) designed to create the illusion of market movement inRead More


BIS Numbers and the Market for Forex NDFs

Jun 1st, 2017 | Filed under: Data Science & AI, Featured Post, Newly Added, Asset Allocation

A little over a year ago, the Bank for International Settlements announced its 11th Triennial Central Bank Survey of Foreign Exchange and Over the Counter Derivatives Market Activity. In recent days, Pragma Securities has referenced those BIS numbers in explaining the market for its latest service, an expansion of PragmaRead More


Big Data is Old Hat: Machine Learning is Hot

Jan 26th, 2017 | Filed under: Data Science & AI, Featured Post, Manager Selection, Newly Added, Asset Allocation

A year ago, in a report on Big Data and investment management, Citi Business Advisory Services predicted that “with the improved volume, velocity and variety of data inherent in the big data approach, the innovation seen in systematic trading models over the past decade could accelerate.” One of the platformsRead More


On the Bitcoin Blockchain: Looking Under the Hood

Jan 19th, 2017 | Filed under: Data Science & AI, Emerging Asset Classes, Access to Alternatives, Featured Post, Newly Added, Asset Allocation

More than a year ago, the Capco Institute Journal of Financial Transformation (Journal) ran a “critical assessment,” by Robert Sams, of bitcoin blockchains as a means of distributed clearing. With both bitcoins and blockchains newly in the news, Sams’ informed assessment is worth another look. Two years ago, Nasdaq announcedRead More


Academics:  No, Navinder Sarao Did Not Cause the Flash Crash 

Oct 25th, 2016 | Filed under: Data Science & AI, State of the Industry, Featured Post, Newly Added, Asset Allocation, Risk Management, Hedge Funds

Mid-October news reports tell us that Navinder Sarao has lost his effort to avoid extradition from Britain to the United States. So he will face charges in the U.S. in connection with the “flash crash” of May 2010, the incident in which the DJIA fell 998.5 points in less thanRead More


Tick Pilot Program: A Progress Report

Oct 4th, 2016 | Filed under: Data Science & AI, State of the Industry, Access to Alternatives, Featured Post, Newly Added, Asset Allocation

The long-awaited nickel-tick pilot program, an effort to test an alternative to the penny-or-less tick sizes that now prevail, , officially gets underway on October 3, and is scheduled to continue for two years. Securities have been selected and the phase-in schedule is set. The pilot is of significance, becauseRead More


ESMA’s Greybeards Ponder Blockchains

Sep 11th, 2016 | Filed under: Data Science & AI, Emerging Asset Classes, State of the Industry, Access to Alternatives, Featured Post, Newly Added, Asset Allocation

There has been a flurry in recent days of activity about blockchains among the graybeards of the financial world, those who ponder the Really Big Picture and who have the ear of important regulators. Let us start from the beginning. What is a blockchain? It is a chronological, virtual, andRead More


UC Berkeley: Stale Prices Not a Threat to Liquidity Takers

Sep 7th, 2016 | Filed under: Data Science & AI, Featured Post, Newly Added, Asset Allocation, Hedge Funds

Two scholars associated with the University of California, Berkeley, have argued in a recent paper that there is less to latency arbitrage, or at least to a certain paradigmatic sort of latency arb, than meets the eye. Robert P. Bartlett III and Justin McCrary used data from the Securities InformationRead More


Lewis’ Heroes Get an Exchange for Their Speed Bump

Jun 26th, 2016 | Filed under: Data Science & AI, Featured Post, Newly Added, Asset Allocation, Hedge Funds

On Friday, June 17, the Securities and Exchange Commission approved the promotion of IEX from an ATS to a proper exchange. Thereby it gave a new ending of sorts to Michael Lewis’ book, Flash Boys. One of the big issues for both proponents and opponents of IEX’ application to becomeRead More


Escape to the Internet? Or Build Better Communities?

May 8th, 2016 | Filed under: Data Science & AI, State of the Industry, Access to Alternatives, Featured Post, Newly Added, Asset Allocation, Risk Management

Dissatisfaction with the fiat money issued by or on signals from central bankers will not go away. Talk of “printing press” money seems quaint, as when people of my generation still refer to a keyboard as a “typewriter.” Central banks and their servants (and their servers) around the world engage,Read More


Bollerman Addresses IEX’s Critics

Feb 9th, 2016 | Filed under: Data Science & AI, Newly Added, Asset Allocation

IEX, the institution created by Michael Lewis’ “flash boys,” began life as an ATS. But as its name, a shortening of “Investors’ Exchange,” suggests, it has always aspired to be an exchange. One of its core principles is its “speed bump,” a system of delaying the availability of market pricingRead More


“We Aren’t Obsolete,” Says DTCC White Paper

Feb 4th, 2016 | Filed under: Data Science & AI, Manager Selection, Newly Added, Risk Management

The Depository Trust and Clearing Corporation has issued a new white paper on block chains and their significance in the context of the post-trade landscape. Block chains, also known as distributed ledgers, are a hot new technology, made so in large part by the cryptocurrency Bitcoin and by the publicityRead More


The Elusiveness of the Natural Block Trade

Nov 1st, 2015 | Filed under: Data Science & AI, Asset Allocation, Risk Management

Trading on natural blocks is a very desirable goal. So why aren't more traders doing it? How hard are they trying? Some questions from a TABB paper, and from an intriguing commenter at TabbForum. Read More


Overtrading and the Danger of Pro Rata

Jul 30th, 2015 | Filed under: Data Science & AI, Asset Allocation, Hedge Funds, Commodities & Natural Resources

Guest columnist Ginger Szala looks at pro rata and what happens if...Read More


Enterprise Software Marketers Confirm: Seven is a Sacred Number

Jul 21st, 2015 | Filed under: Data Science & AI, Access to Alternatives

God rested on the seventh day of the week of creation. Ever since, the number seven has stood for the completion of an epoch, or of a perfect set. Thus, a German enterprise concern has now listed the "seven pillars" for improved market surveillance through software.Read More


Climate Finance: A Priority for the MDBs

Jul 15th, 2015 | Filed under: Data Science & AI, ESG

A new report from the World Bank says that six multilateral development banks delivered more than $28 billion in financing in 2014 that "address climate change" in one of two ways, mitigation or adaptation. Read More


Aleynikov Again: State Jury Conviction Set Aside

Jul 8th, 2015 | Filed under: Data Science & AI, Access to Alternatives

The judge's ruling setting aside the jury's guilty verdict is, of course, grand news for Aleynikov. It is also the curtain on a sometimes farcical spectacle. But let us not forget that there are issues of principle involved. Read More


PwC Looks Ahead to 2020: Offers a Roadmap for Alternative Investment Managers

Jul 5th, 2015 | Filed under: Data Science & AI, Infrastructure, Asset Allocation, Hedge Funds

PwC offers a glimpse of a 'day in the life' of a typical compliance analyst in 2015 and again in 2020. As these authors tell it, the day is filled with data, darkness, and drudgery at present, but it will be airy, alliterative, and analytical in another five years. Read More


Spoofing: The ‘It’ Enforcement Action

Jun 17th, 2015 | Filed under: Data Science & AI, Access to Alternatives, Hedge Funds

Spoofing is probably about as ubiquitous as texting-while-driving. And it is possible to make an example of a spoofer caught red-handed. But it isn't clear what purpose that will serve. The real problem is that a broken market contains a broken set of incentives. Read More


Who Will Meet Yahoo at the Altar?

Jun 16th, 2015 | Filed under: Data Science & AI, Emerging Asset Classes, Real Estate, Hedge Funds

There was some excitement as recently as January 2015 over renewed talk of a Yahoo/AOL deal, but after the bloom finally came off that rose, YHOO settled into a trading range has been roughly from $42 to $46. Faille guesses that there is an opportunity here on the upside of that range, because another suitor is bound to appear.Read More


Java IP War: The Obama Administration Picks the Wrong Side

Jun 8th, 2015 | Filed under: Data Science & AI, Emerging Asset Classes

The Solicitor General, speaking for the United States, has filed the expected amicus brief in the Google/Oracle showdown. The SG's position is that the Supreme Court should refuse to hear the case so that the lower courts can get back to using what the brief calls the "flexible fair use doctrine" to do justice. Read More


Copper Prices: Why the Downslope?

May 26th, 2015 | Filed under: Data Science & AI, Risk Management, Commodities & Natural Resources

How long will it take before the world again sees copper at around $10,000 a ton, the going price it touched (though briefly) in early 2011? Perhaps several more years and another full business cycle. There may be a lot of down before an upturn gets us there. Read More


What’s in a Copyright? Java API Case Before U.S. Supreme Court

May 25th, 2015 | Filed under: Data Science & AI, Emerging Asset Classes, State of the Industry

High-stakes litigation between Google and Oracle approaches its resolution at the Supreme Court. For seekers of alpha, this isn't just about what investments to make, but about the way one goes about making them, the very mechanics of trading. Read More