The Horror of Quant Trading

The Daily Bell
September 27, 2011

Quant trading: How mathematicians rule the markets… Trading floors were once the preserve of adrenalin-fuelled dealers aggressively executing the orders of brokers who relied on research, experience and gut instinct to decide where best to invest. Long ago computers made dealers redundant, yet brokers and their ilk have remained the masters of the investment universe, free to buy and sell wherever they see fit. But the last bastion of the old order is now under threat. Investment decisions are no longer being made by financiers, but increasingly by PhD mathematicians and the immensely complex computer programs they devise. Fundamental research and intuition are being usurped by algorithmic formulae. Quant trading is taking over the world’s financial capitals. – BBC

Dominant Social Theme: It’s just inevitable. Stock markets were always fated to be one big casino. Nothing can be done but to mourn the passing of equities as a rational investment opportunity.

Free-Market Analysis: This article by the BBC’s Richard Anderson ticks all the boxes of a certain kind of dominant social theme. One is supposed to be slightly melancholy at the pace of progress in the global stock market and the application of trading technology to what used to be investible instruments.

At the same time, one is NOT supposed to question the fundamental underlying assumption of an article like this – that it doesn’t have to be like this. No it doesn’t! In this article we will examine how the West’s investment industry has become so distorted and why securities marketplaces are now run like casinos.

Read full report here

 

This article was posted: Tuesday, September 27, 2011 at 10:09 am

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