Methodology
Alpha generation platforms are used to locate excess return in the capital market. They enable the development of mathematical and statistical models that help determine whether or not a specific investment may be profitable. In some quant-driven funds, these models make the final decision on whether to buy or sell an investment.
These systems cannot be fully trusted and require qualified quantitative analysts to try to prevent massive drawdowns. The dangers of relying upon a platform as illustrated in the paper by Andrew Lo.
The average quantitative strategy may take from 10 weeks to seven months to develop, code, test and launch. It is important to note that alpha generation platforms differ from low latency algorithmic trading systems. Alpha generation platforms focus solely on quantitative investment research rather than the rapid trading of investments. While some of these platforms do allow analysts to take their strategies to market, others focus solely on the research and development of these highly complex mathematical and statistical models.
Read more about this topic: Alpha Generation Platform
Famous quotes containing the word methodology:
“One might get the impression that I recommend a new methodology which replaces induction by counterinduction and uses a multiplicity of theories, metaphysical views, fairy tales, instead of the customary pair theory/observation. This impression would certainly be mistaken. My intention is not to replace one set of general rules by another such set: my intention is rather to convince the reader that all methodologies, even the most obvious ones, have their limits.”
—Paul Feyerabend (1924–1994)