Abstract

Today, you can put more computing power on your desk than was available to the entire U.S. Department of Defense twenty years ago. And there is still plenty of room left on the desk. What does this imply for the future of quantitative investing?

Computer systems have been used for some time to develop and refine quantitatively managed investment products. Historically, these products have been developed using traditional statistical and econometric methods. Today, the explosive growth in information technology has created opportunities for investment managers to exploit new quantitative and computing methods. They can apply substantial technological leverage to expand and improve methods already in use.

We have begun a focused effort to identify, develop, and apply innovative ideas from machine learning, quantitative modeling, and advanced information technology that will have a direct positive impact on our performance. The first example of this process has been in the application of a machine learning method known as the genetic algorithm to improve the models used in our tactical asset allocation and international equity strategies.