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Nerds on Wall Street: Math, Machines, and Wired Markets

Book Description

An intriguing look at how technology is changing financial markets, from an innovator on the frontlines of this revolution

Nerds on Wall Street tells the tale of the ongoing technological transformation of the world's financial markets. The impact of technology on investing is profound, and author David Leinweber provides readers with an overview of where we were just a few short years ago, and where we are going. Being a successful investor today and tomorrow--individual or institutional--involves more than stock picking, asset allocation, or market timing: it involves technology. And Leinweber helps readers go beyond the numbers to see exactly how this technology has become more responsible for managing modern markets. In essence, the financial game has changed and will continue to change due entirely to technology. The new "players," human or otherwise, offer investors opportunities and dangers. With this intriguing and entertaining book, Leinweber shows where technology on Wall Street has been, what it has meant, and how it will impact the markets of tomorrow.

Table of Contents

  1. Copyright
  2. Dedication
  3. Foreword
  4. Acknowledgments
  5. Introduction
  6. Wired Markets
    1. An Illustrated History of Wired Markets
      1. Notes
    2. Greatest Hits of Computation in Finance
      1. Financial Technology Stars
      2. Hits and Misses: Rational and Irrational Technology Exuberance
      3. The Crackpot as Billionaire
      4. Future Technological Stars
      5. Mining the Deep Web
      6. Language Technology: Your Tax Dollars at Work
      7. EDGAR: The SEC Gets the XML Religion
      8. Greatest Hits, and the Mother of All Greatest Misses
      9. Notes
    3. Algorithm Wars
      1. Early Algos
      2. Algos for Alpha
      3. Algos for the Buy Side: Transaction Cost Control
      4. From Order Pad to Algos
      5. A Scientific Approach: Mathematics, Behavior, and Discovery
      6. Job Insecurity for Traders
      7. So Many Markets, So Little Time
      8. Known Unknowns and Unknown Unknowns
      9. Models Aren't Markets
      10. Robots, RoboTraders, and Traders
      11. Markets in 2015, Focus on Risk
      12. Playing Well with Robots and Algorithms
      13. Seeing the Big Picture in Markets
      14. Agents for News and Pre-News
      15. Algorithms at the Edge
      16. Notes
  7. Alpha as Life
    1. Where Does Alpha Come From?
      1. Alpha from Innovation
      2. Alpha, the ARPANET, and the Internet
      3. Summary
      4. Notes
    2. A Gentle Introduction to Computerized Investing
      1. Indexing 101
      2. Active Management
      3. What Do Quantitative Managers Do?
      4. Active Management on Steroids: Market Neutral Portfolios
      5. Finding Information and Inefficiencies to Produce Alpha
      6. All the Stocks, All the Time
      7. Jumping the Trading Cost Hurdle
      8. Putting the Pieces Together
      9. Does This Really Work?
      10. Notes
    3. Stupid Data Miner Tricks
      1. "Your Mama Is a Data Miner"
      2. Strip Mining the S&P 500
      3. Enough Regression Tricks
      4. Is There Any Hope for Data Miners?
      5. Summary (and Sermonette)
      6. Counting the Kiddies
      7. Notes
  8. Artificial Intelligence and Intelligence Amplification
    1. A Little AI Goes a Long Way on Wall Street
      1. Prehistory of Artificial Intelligence on Wall Street
      2. AI People Can Use
      3. Where's the AI?
      4. Real Charting
      5. Virtual Charting
      6. Descriptive Programming
      7. Information Flows and Displays in MarketMind and QuantEx
      8. Integration with Real-Time Feeds and Historical Databases
      9. Composing Syntactically Bulletproof Programs
      10. From Indications to Orders to Executions
      11. Vapor No More
      12. Future Plans for AI in Finance (in 1995)
      13. Notes
    2. Perils and Promise of Evolutionary Computation on Wall Street
      1. The AI Spring?
      2. Genetic Algorithms
      3. Evolving Financial Models
      4. An Early Lesson: Intelligence without Learning
      5. Arbitrage and Predictive Strategies
      6. Maximizing Predictability
      7. Chromosomes for Forecasting Models
      8. Fitness Functions for Forecasting Models
      9. Use of the GA for Coping with a Combinatoric Explosion of Models
      10. Genetically Optimized Forecasting Models in Hindsight
      11. Genetic Algorithm Warning Label
      12. Notes
    3. The Text Frontier
      1. Ten Pounds of News in a Five-Pound Bag
      2. Pre-News and Disintermediation
      3. More Pre-News on the Internet
      4. Notes
    4. Collective Intelligence, Social Media, and Web Market Monitors
      1. Investing with Crowds
      2. Never Met a Data Vendor I Didn't Like
      3. Santa Claus Is Coming to Town
      4. Counting Messages
      5. Whisper Numbers—Ruined by Success
      6. Monitoring Web Activity: No GUI, No Glory
      7. More Web, More Warnings
      8. Notes
    5. Three Hundred Years of Stock Market Manipulations
      1. The Power of Manipulation
      2. A Classic Market Manipulation
      3. The Very Model of a Modern Market Manipulator
      4. Bluffing
      5. How Communication Changes Market Manipulation
      6. Anatomy of a Successful Manipulation
      7. The Internet Era: A Manipulator's Paradise
      8. Cyber-Manipulations
      9. It's Not Just Micro-Caps
      10. Where Are We Headed?
      11. Notes
  9. Nerds Gone Wild
    1. Shooting the Moon
      1. To Protect and to Serve: Market Transparency
      2. Stupid Engineering Tricks
      3. Stupid Financial Engineering Tricks
      4. Take Them Out and Shoot Them
      5. Tech Hall of Shame
      6. Quants Who Saw It Coming
      7. Notes
    2. Structural Ideas for the Economic Rescue
      1. Fractional Home Ownership
      2. New American Bank Initiative
      3. Still Mad, but Ever Hopeful
      4. Notes
    3. Nerds Gone Green
      1. Accelerating Innovation
      2. From the Vault: Bits, Bucks, and BTUs
      3. Billions of Dollars and Millions of Tons of Carbon
      4. Epilogue
      5. Notes
      6. NOWS Companion Web Site
  10. About the Web Site