Word: quant
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Dates: during 2000-2009
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...pressing forward.While backward-looking VaR models relied entirely on data from past years, forward-looking VaR models were able to pick up on the increased volatility of the market before securities prices took a nosedive, says Aaron C. Brown ’78, a risk manager at the quant hedge fund AQR Capital Management. But when the forward-looking VaR suddenly rose—reflecting a dramatic increase in risk—warning signs went unheeded.“People have a tendency to ignore that and to say, ‘Well, just clean up the numbers...
...subprime-fueled demise of a hedge fund run by Swiss bank UBS. Basis Capital, an Australian firm with more than $2 billion in assets, was forced in August to liquidate its Basis Yield Alpha Fund, which had previously been one of Australia's best-rated hedge funds. Numerous quant funds, which use computerized analysis to make investment decisions, posted big losses as stock markets reeled from the subprime mess...
...higher arts. Then, in 1962-63, came a few hints that Britain might be opening up. The country was enjoying a pop-arts renaissance, spurred mostly by children of the working and lower-middle classes, in music (the Beatles and their spawn), art (David Hockney), fashion (Mary Quant, Twiggy) and photography (David Bailey). Might the U.K. become as receptive to upward mobility as the supposedly class-blind...
Then why the recent spike in performance? One thing quant funds have had going for them lately is a market that favors value. Hyped-up fast-growing companies haven't done as well as more established, steady firms--and the latter are the sort of stock that quant investors often end up with. That's because their process, which usually includes hypothesis-testing an idea before it's added to the computer model, relies on historical data, and growth companies tend to work because of what has yet to happen. The fabulous returns of the past few years...
...that's just fine by quants. "What we're really trying to do is deliver a consistent value added," says Joel Dickson, who runs quant investing at Vanguard. Translation: Slow and steady--and a little nerdy--wins the race...