Inside the Black Box: The Simple Truth About Quantitative Trading

Chapter 13. Looking to the Future of Quant Trading

All evolution in thought and conduct must at first appear as heresy and misconduct.

—George Bernard Shaw

The black-box trading strategy has existed for over three decades. This book has provided you with the tools necessary to understand this niche of the investment community, perhaps for the first time. From its earliest days in trend-following applications to the most recent and state-of-the-art high-frequency machine learning strategies, the field of quant trading has evolved considerably since its early days. Yet recently it is hard to ignore the travails the quant trading field, particularly in equity market-neutral strategies, has undergone. Starting in July 2007 and sporadically again in 2008, large swaths of the quant trading universe have delivered poor results, unprecedented downside risk, and easy headlines for those who love to hate them.

Regardless, other niches within the domain of quant trading—and even some of the types of quants whose peers have done poorly—have thrived. Assets have flowed vigorously into systematic futures trading strategies, which outperformed during the aforementioned tumult of mid-2007 through late-2008, having benefited from the price trends that formed the bear market in equities. High-frequency equity traders have profited from increased volatility and liquidity in the markets. Even some that share a label with the statistical arbitrage and quantitative long/short practitioners who have ...