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

2.8. Greatest Hits, and the Mother of All Greatest Misses

Numerical information is the bedrock of financial analysis—fundamental, quantitative, and technical. But people look at the words, too. Sometimes the footnotes to the table change the meaning of the numbers. Sometimes the words tell a story that doesn't show up in the numbers. The challenge of the text frontier is to find ways to use both types of information to improve investment and trading.

This chapter has attempted to highlight the most important impacts of technology on investment management in the past and to look at the innovations that may have a similar impact in the future. Of course, the former are on much firmer ground than the latter. Think how unlikely it would have been to describe the spreadsheet or the Web before they were invented.

Everybody trades; everybody reads. Highlighting electronic market access and the text frontier as promising areas for broad impact in the future is the fact that they provide support for trading and reading, two very common and very central activities in investment management; it is only a short trip out on a limb to anticipate that these areas will see more innovative technology in the future.

This chapter was written before the dreadful autumn of 2008. Among other things, recent events have been a reminder of how quaint a pursuit of quantitative and textual computerized stock picking is in the wide world of finance.

Quants as a group have been tarred as responsible for recent ...