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February 2 - February 7, 2021
God gave me a tail to keep off the flies. But I’d rather have had no tail and no flies.’ That’s kind of the way I feel about publicity.”1
“Bad ideas is good, good ideas is terrific, no ideas is terrible.”
The whys didn’t matter, Simons and his colleagues seemed to suggest, just the strategies to take advantage of the inferred states.
suggesting that one could deduce a range of “signals” capable of conveying useful information about expected market moves.
In a Markov chain, it is impossible to predict future steps with certainty, yet one can observe the chain to make educated guesses about possible outcomes.
don’t matter. If the next pitch is a strike, the batter is out. A hidden Markov process is one in which the chain of events is governed by unknown, underlying parameters or variables.
allow someone to infer a sense of the sport’s rules from the distribution of scores, even as the full rules remained hidden.
“The Baum-Welch algorithm gets you closer to the final answer by giving you better probabilities,”
Baum-Welch enabled the first effective speech recognition system and even Google’s search engine.
don’t want to have to worry about the market every minute. I want models that will make money while I sleep,”
“He had the buy-low part, but he didn’t always have the sell-high part,”
no performance results until the end of each month.
“The name of the game is not to always be right, but to be right often enough.”
Renaissance would fully embrace stochastic differential equations for risk management and options pricing,
“Just follow the data, Jim,” he said. “It’s not me, it’s the data.”
higher dimensional kernel regression approaches, which seemed to work best for trending models, or those predicting how long certain investments would keep moving in a trend.
I strongly believe, for all babies and a significant number of grownups, curiosity is a bigger motivator than money. Elwyn Berlekamp
“When I heard MIT didn’t have a football team, I knew it was the school for me,” he says.
Scientists are human, often all too human. When desire and data are in collision, evidence sometimes loses out to emotion.
trends. Laufer also uncovered how the previous day’s trading often can predict the next day’s activity, something he termed the twenty-four-hour effect.
“We must still rely on human judgment and manual intervention to cope with a drastic, sudden change,”
An eighteenth-century Japanese rice merchant and speculator named Munehisa Homma, known as the “god of the markets,” invented a charting method to visualize the open, high, low, and closing price levels for the country’s rice exchanges over a period of time. Homma’s charts, including the classic candlestick pattern, resulted in an early and reasonably sophisticated reversion-to-the-mean
“speculators should learn to take losses quickly and let their profits run”—tactics
A line from Ecclesiastes guided Gann’s moves: “That which has been is that which shall be . . . there is nothing new under the sun.”
Gann concluded that a universal, natural order governed all facets of life—something he called the Law of Vibration—and that geometric sequences and angles could be used to predict market action. To this day, Gann analysis remains a reasonably popular branch of technical trading.
his insight that players can take advantage of shifting odds within games of chance.
also brought on whip-smart employees from different backgrounds. English and philosophy majors were among Shaw’s favorite hires, but he also hired a chess master, stand-up comedians, published writers, an Olympic-level fencer, a trombone player, and a demolitions specialist.
“We didn’t want anyone with preconceived notions,” an early executive says.11
No one ever made a decision because of a number. They need a story.
“I had a very strong belief that the Germans were obsessed with inflation,”
