Thiago Marzagão's Reviews > The Man Who Solved the Market: How Jim Simons Launched the Quant Revolution

The Man Who Solved the Market by Gregory Zuckerman
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it was amazing

I had always believed in the efficient market hypothesis. This book convinced me that I was wrong: it's not that there aren't inefficiencies to be exploited in financial markets, it's just that humans suck at seeing them. The same cognitive biases that create those inefficiencies in the first place also prevent us from exploiting them. We see signal where there is only noise, we anchor our expectations, we become emotionally invested in our choices. But the machine is immune to all that.

Zuckerman gets into a lot more detail about Renaissance's models than I expected him to. I guess by now there are enough ex-employees willing to share company secrets. Or maybe the company secrets they are willing to share are not that big anymore: using Markov chains to model price movements, looking for price ratios instead of absolute prices, etc. Whatever is happening at quant funds right now is probably way beyond any of that (convolutional neural networks that count cars in Walmart's parking lots, that sort of thing).

I was ready to roll up my sleeves and start modelling stuff, but fortunately I got to this point in the book first: "In the five years leading up to spring of 2019, quant-focused hedge funds gained about 4.2 percent a year on average, compared with a gain of 3.3 percent for the average hedge fund in the same period." Well, the S&P500 yields on average 9.8% a year (6% after inflation). For Simons to get his average 66% yearly return he had to hire a team of geniuses. I'm no genius, and I'm not in a position to hire any geniuses to work for me, so I guess I'm staying with index funds (except maybe for some "fun money").

Overall this is a well written, well researched book, and I got a lot out of it.
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Reading Progress

July 22, 2020 – Shelved as: to-read (Hardcover Edition)
July 22, 2020 – Shelved (Hardcover Edition)
July 24, 2020 – Started Reading
July 24, 2020 – Shelved
August 7, 2020 – Finished Reading

Comments Showing 1-2 of 2 (2 new)

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message 1: by Tiago (new)

Tiago Pereira Cara, os teus reviews são bons demais. Keep them coming, please! :)

message 2: by Thiago (new) - added it

Thiago Marzagão Tiago wrote: "Cara, os teus reviews são bons demais. Keep them coming, please! :)"

Valeu demais, Tiago! :-D

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