What Is Quantitative Investing?

When it comes to quantitative investment, the first thing that comes to mind is the model. The auxiliary role of the model for quantitative investment is like the role of precision medical instruments such as CT machines for doctors. Before the investment operation, a comprehensive inspection and scanning of the entire market is performed with the model, and then investment decisions are made based on the results. Quantitative investment originated from Simmons, James Simmons is a world-class mathematician. Simmons, who has a low-key style, rarely gives interviews, but since he gave up his career in mathematics and switched to starting an investment management company, in the past two decades, Simmons has created many difficult records, both in total profit and In terms of net profit, he is one of the greatest hedge fund managers on the planet.

Quantitative investment

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Discover stocks whose earnings growth exceeds expectations; earnings quality: a perspective on corporate profitability, focusing on high-quality, sustainable profitability; behavioral finance: grasping transactional opportunities brought about by overreaction and underreaction in the market Unlike qualitative investment, the portfolio construction of quantitative investment is done by the system. Based on the refined investment ideas, the system selects stocks that meet standards in the entire market, and optimizes returns and risks to generate the optimal stock portfolio. This systematic combination construction method has the following advantages over the traditional qualitative investment combination construction based on subjective judgment:

The ability of the human brain to process information is limited, while modern computer systems can efficiently and accurately process massive amounts of data. Relative to qualitative investment, quantitative investment can take advantage of the system's powerful information processing capabilities to find investment opportunities in the entire market 360 degrees and obtain excess returns.

The systematic combination construction can minimize the influence of human emotions on the combination and more objectively reflect the investment ideas of investors.

Quantitative investment uses historical data to verify that investment ideas are different

The quantitative investment system optimizes the portfolio through analysis of investment returns and risks, and maximizes expected excess returns based on effective risk control. Of course, quantitative investment has its limitations compared to qualitative investment. For example, it has a strong dependence on historical data and lacks a sufficient understanding of the company's management mechanism. In fact, any investment method inevitably has its advantages and disadvantages. Active qualitative investment and active quantitative investment can generate excess returns as long as they are properly applied. Buffett, the head of qualitative investment, has obtained more than 20% of annual income through accurate judgments on corporate management, finance, value, and growth in the past 20 years. In the past 20 years, Fuxing Hedge Fund has achieved brilliant results through quantitative modeling and systematic investment. Quantitative investment and qualitative investment are not contradictory. The rational investment style of quantitative investment based on fundamental analysis is an effective supplement to traditional investment methods.