In a sunny Saturday afternoon, as our guest speaker – Jim Hwang, managing director from CPPIB – asked, why we were here instead of going outside with our friends or families? You may find the answer in the eyes and on the faces of everyone attending this event.
This speech was about a hot but somewhat mysterious topic – quantitative investment. When we talk about it, we usually think of lots of numbers, models, calculations that may intimidate some. Is that true? What’s the full landscape of this field? Why it gradually catches more investors’ eyes over these decades, and how it compares to other conventional investment strategies? In this event, Jim helped us unveil the mask of this world.
Firstly, Jim led us through the academic development of the quantitative investments. There exist two separate branches that require advanced quantitative techniques: The Q-quant of derivatives pricing, whose task is to “evaluate current risks, make markets, or seek arbitrage opportunities”; and the P-quant of quantitative risk and portfolio management, whose task is to “model the future”.
The quantitative investments began in the 1950’s with development of ‘modern portfolio theory’ by Harry Markowitz. In the past 60 years, there are many new theories emerging in this industry, such as CAPM, APT, BS model, Barra model and Fama-French three factor model, etc. In front of the audience, Jim lay out a clear road map with key market events.
Then Jim envisioned the future of quantitative investing. Although we don’t have the perfect model, we keep pursuing a better one within the limited resources. We filter the noise to get the true information and study the behavioral bias of human beings. And we should be mindful with the limitations of the models. But how? Jim gave us a valuable suggestion: ABL (Always Be Learning).
The lecture concluded with a Q&A session filled with high quality discussions on various subjects ranging from liquidity concern to investor behaviors. Enthusiasts stayed around the speaker almost one hour after the end of the session.
We’d like to take this opportunity to thank Jim for taking his time to share his expertise and knowledge. And through events like this, we can commit ourselves to “always be learning”.