Inside the Black Box: The Simple Truth About Quantitative Trading

9.4. SUMMARY

We have only scratched the surface of the work that a quant must do in research, and must do well, to succeed over time. Research is a highly sensitive area within the quant's process. It is where her judgment is most obviously and significantly impactful. Researchers must therefore go about their research with great care because this is the formative stage of a strategy's life. Mistakes made during research become baked into a strategy for its lifetime, and then the systematic implementation of this error can become devastating. Moreover, the research effort is not a one-time affair. Rather, the quant must continually conduct a vigorous and prolific research program to produce profits consistently over time.

Exhibit 9.6. Schematic of the Black Box

We have now completed our tour through the black box (see Exhibit 9.6), both its component models and the key elements—data and research—that drive it. The coming chapters will focus on the evaluation of quant traders and their strategies.