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Matt Levine

Quants, Currencies and Merger Pranks

Also Wall Street vs. Silicon Valley, market structure, and a CEO who wanted only the best for his sales leaders.


Here's a nice explanation of how quant firms like Two Sigma work, using computers to sift market data and analyst reports and financial statements and Twitter and so forth for statistical signals that predict stock prices, and then feeding those signals into a decision engine that buys and sells stocks based on the strength and accuracy of the combined signals. For balance there are some dire warnings that these firms might be making bets based on spurious correlations, but have you met people? We're all making bets based on spurious correlations; some of us just have 100 teraflops of computing power to test those correlations. There's also a bunch of stuff about Two Sigma, which like all trading firms cultivates an image of "A walk through its offices shows how far it is from traditional Wall Street." Apparently at career fairs, "Prospective recruits don virtual-reality headsets that bring them through a frenetic Times Square and fly them over buildings in Dubai," which, sure, is pretty weird. I wonder if they can integrate that with StockCity. (Disclosure: I interviewed once for a job at Two Sigma, though this was years ago and there were no virtual-reality headsets involved.)