Why Are Quantitative Funds Losing Coin These Days?

The New York Times today has an article close several well-known quantitative hedge funds incurring pregnant losses inwards recent months. I was quoted inwards proverb that traders running like quantitative models could contribute to marketplace position volatility. This is for sure truthful if the strategies are trend-following. What puzzles me, however, is that most statistical arbitrage strategies are mean-reverting: they purchase during investors' panic, together with sell during investors' euphoria, together with should move richly rewarded inwards this volatile marketplace position yesteryear providing sorely needed liquidity. And indeed, from my ain sense besides equally hearing from other traders, mean-reverting strategies are performing rattling good recently. So where did those losses come upward from? My approximate is that, equally I bring observed before, many traditional stat arb strategies are getting tiresome together with generating diminishing returns, together with thus many of the quantitative researchers are driven (by their ain professional person pride or their bosses) to come upward up alongside to a greater extent than exotic together with higher-return strategies that ultimately may non stand upward the exam of time. For us quants, remembering Occam's razor together with that our project is to generate returns equally opposed to producing vivid mathematical models is oft a difficult lesson to learn.