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gaj


Total Posts: 103
Joined: Apr 2018
 
Posted: 2019-12-18 11:49
One technique that I've often heard associated with RenTech is Hidden Markov Model. Lenny Baum invented Baum-Welch Algorithm which solves the MLE for HMM. Mercer and Brown from IBM worked on speech recognition problems that also use HMM.

Anyone has insights on how HMM is used in trading? What are examples where HMM is superior than simple regression?

rod


Total Posts: 410
Joined: Nov 2006
 
Posted: 2019-12-18 13:33
From another Talking Machines podcast, this one with Nick Patterson, that was previously posted on this thread:

"I joined a hedge fund, Renaissance Technologies. I'll make a comment about that. It's funny that I think the most important thing to do on data analysis is to do the simple things right. So, here's a kind of non-secret about what we did at Renaissance: in my opinion, our most important statistical tool was simple regression with one target and one independent variable. It's the simplest statistical model you can imagine. Any reasonably smart high school student could do it. Now we have some of the smartest people around working in our hedge fund. We have string theorists we recruited from Harvard, and they're doing simple regression. Is this stupid and pointless? Should we be hiring stupider people and paying them less? And the answer is no. And the reason is nobody tells you what the variables you should be regressing [are]. What's the target? Should you do a nonlinear transform before you regress? What's the source? Should you clean your data? Do you notice when your results are obviously rubbish? And so on. And the smarter you are the less likely you are to make a stupid mistake. And that's why I think you often need smart people who appear to be doing something technically very easy, but actually usually it's not so easy."




rod


Total Posts: 410
Joined: Nov 2006
 
Posted: 2019-12-18 13:40
@EspressoLover, are you sure Eric Lander was at RenTech? Are you confusing him with Nick Patterson?

EspressoLover


Total Posts: 432
Joined: Jan 2015
 
Posted: 2019-12-18 15:22
@rod. Thanks for pointing that out. You're right.

Good questions outrank easy answers. -Paul Samuelson

jslade


Total Posts: 1210
Joined: Feb 2007
 
Posted: 2019-12-19 17:26
> C'mon guys. Information geometry? I'm sure there's maybe one small application there using information geometry for some corner case that gives a 2% improvement over regular PCA.

FWIIW there are lots of uses of Information Geometry where you get fiddley and general improvements in bias variance on estimators in the presence of non-normal noise, which is obviously relevant to this sort of thing. For example: click here. I buy that it gets used somewhere, and was glad to hear about it here as it's a cool basket of ideas for my own efforts.

Also, yes, I originally posted the Patterson thingee in this thread, and know people at Edgestream who say the same things. The moon math isn't the important thing, but I'd be shocked and amazed if they didn't work the latest results in here and there.

"Learning, n. The kind of ignorance distinguishing the studious."

nikol


Total Posts: 1124
Joined: Jun 2005
 
Posted: 2019-12-19 23:03
Surprised this is not here

https://www.youtube.com/watch?v=SVdTF4_QrTM

His humor sounds as Tom Waits performance at "Nighthawks At the Diner" or it is Tom's sound like a humor of Jim.

TSWP


Total Posts: 448
Joined: May 2012
 
Posted: 2020-02-25 23:31
I am reading the recent book about RenTec, almost finished...

Maybe is a bad idea to say what I think about it... but I am going to start from here, the start of this thread was this beautiful statement:

> Jim Simons runs the sort of house I expect the majority of us would like to be in.


... but after reading the book by Gregory Zuckerman I am not so sure RenTec is a place any of us would want to be in...

sure it is one of the best fund out there, probably the best in the >20B AUM bucket...

...and I don't know how much of the content of the book is fictionalized... but I find most of the characters in there (excluding the one genius: Jim Simons) quite pathetic... some of them borderline nuts and/or unbearable to work with...

Magerman, Mercer, etc., great scientists, programmers, whatever, their talent is not in discussion, they are the best, but the way they behave (if what the book says it's true, and some things we know for sure are real, like Mercer funding massively a certain guy that became president...and then being fired for the impact of his political views on the firm...)... I mean I can't empathize with these guys, they look like complete imbeciles as soon as you take them out of their job field where they obviously excel...

Maybe we thought that RenTec was some sort of oasis populated by fantastic people doing great things, but reading the book I find the reality somehow disappointing (and also the book is BAD per se, lots of pages are spent to talk about a lot of stuff that frankly is not even worth our time...).

One thing that shocked me was to read this part below... I think many of us imagined RenTec has +300 smart people accomplishing great things every day, but it seems the reality is different, there is a lot of room for mediocrity, as long as you do not interfere with the firms returns you will still get paid very well and you will keep your job!

That is awesome! That's a good reason why we would all want to work for a firm like that!


rod


Total Posts: 410
Joined: Nov 2006
 
Posted: 2020-02-26 05:13
From one of Novakovski's answers on Quora:

"We have some Tier One mathematicians and a lot of Tier Two mathematicians. Other quants funds have mostly Tier Three mathematicians, and worse, they don’t even know that these tiers exist!"


Jurassic


Total Posts: 358
Joined: Mar 2018
 
Posted: 2020-03-01 11:20
> "We have some Tier One mathematicians and a lot of Tier Two mathematicians. Other quants funds have mostly Tier Three mathematicians, and worse, they don’t even know that these tiers exist!"

Great sales pitch there! Anyone else just not believe this?

pj


Total Posts: 3522
Joined: Jun 2004
 
Posted: 2020-03-01 21:08
Well, I know a guy who's working there, and
he's definitely a first tier mathematician.
No firster, sir.

The older I grow, the more I distrust the familiar doctrine that age brings wisdom Henry L. Mencken

Jurassic


Total Posts: 358
Joined: Mar 2018
 
Posted: 2020-03-02 10:00
what would you say categorises a first class mathematician anyway (whose not working in academia)?

chiral3
Founding Member

Total Posts: 5163
Joined: Mar 2004
 
Posted: 2020-03-02 12:23
They were second and third class researchers and realized they could be first class if they joined rentech.

Nonius is Satoshi Nakamoto. 物の哀れ

TSWP


Total Posts: 448
Joined: May 2012
 
Posted: 2020-03-02 12:35
> They were second and third class researchers and realized they could be first class if they joined rentech.

Dollar Bill Big Smile

TSWP


Total Posts: 448
Joined: May 2012
 
Posted: 2020-03-02 12:36
Just out of curiosity is there an Authority that assigns the tiers to mathematicians....?

like: "Here you go this is your Tier 1 Mathematician Medal"

gmetric_Flow


Total Posts: 38
Joined: Oct 2016
 
Posted: 2020-03-02 13:59
Geometers are automatically tier one (well beside the algebraic ones).

Category theorists and logicians are the bottom tier. You have to interpolate the rest. Wink

pj


Total Posts: 3522
Joined: Jun 2004
 
Posted: 2020-03-02 14:32
A quote:

"I shall not today attempt further to define the kinds of material I understand to be embraced within that shorthand description; and perhaps I could never succeed in intelligibly doing so. But I know it when I see it."
Supreme Court Justice Potter Stewart on some other matters

The older I grow, the more I distrust the familiar doctrine that age brings wisdom Henry L. Mencken

ronin


Total Posts: 585
Joined: May 2006
 
Posted: 2020-03-02 15:52
Maybe we should start selling tiers on eBay. Get a framed certificate and everything.

Special discount for first 100 np users who buy.

"There is a SIX am?" -- Arthur

rod


Total Posts: 410
Joined: Nov 2006
 
Posted: 2020-03-02 21:54
Jim Simons himself once remarked that he was not in Bill Thurston's league. Quoting Steve Hsu:

"Lev Landau, a Nobelist and one of the fathers of the great Soviet physics system, had a logarithmic scale for ranking theorists, from 1 to 5. A physicist in the first class had ten times the impact of someone in the second class, and so on. He modestly ranked himself as 2.5 until late in life, when he became a 2. In the first class were Heisenberg, Bohr, Dirac and some others; Einstein was a 0.5!"

TSWP


Total Posts: 448
Joined: May 2012
 
Posted: 2020-03-03 08:59
To me one of the things that seem to be overlooked by many is that Jim Simons is the founder of RenTec but his actual contribution to RenTec trading systems has been very minimal, and based on what is said in the book, it took him almost 30 years (from 30 to 60 years old) to go from his initial interest in his first days of trading (a "dabbler", albeit a scientist) to an actually working/successful hedge fund.

He had been unsuccessful with his fund operation for many years.

For sure he had challenges that today do not exist anymore (many managers that are successful today are standing on the shoulder of giants, so to speak...), but his main ability was to assemble together a team of capable people, set the proper working environment, the company's direction, and then let them work, until a number of them (Ax, Baum, Mercer, Brown, etc.) step-by-step, year after year, played a part in building something that finally in the 90s (also with some dose of luck), became what RenTec is today...

So it wasn't Jim Simons... it was his people... it was Baum and Mercer and a few others...

But they don't get the credit (out of financial circles of those in the know).

All the credit goes to Jim Simons, the team leader, as it often happens...

I like him, he's a bit of a hero to me somehow, but the truth is RenTec was not built on his trading genius, because he had none... it was other people's genius...


Maggette


Total Posts: 1233
Joined: Jun 2007
 
Posted: 2020-03-03 09:20
I don't believe in "trading genius" anyway. Trading is a business and engineering problem.

It happens to be a very competitive business. But still....

And you just don't run a succesfull business on your own. Jobs didn't. Elon doesn't. Bezoz doesn't. And of course Shaw, Simmons and even Thorp didn't (even though he is quite close).

A large fraction of the HF business seems bogus to me anyways. It's either correlated to an exposure in equity or involves crazy risk taking or doesn't make any money at all.

There are a couple of HFs I consider interesting.

Ich kam hierher und sah dich und deine Leute lächeln, und sagte mir: Maggette, scheiss auf den small talk, lass lieber deine Fäuste sprechen...

TSWP


Total Posts: 448
Joined: May 2012
 
Posted: 2020-03-03 09:45
> There are a couple of HFs I consider interesting.

which ones...?

Maggette


Total Posts: 1233
Joined: Jun 2007
 
Posted: 2020-03-03 10:34
Don't get me wrong. Of course I am fascinated by Rentech (even though I guess the fun part is considered a Prop Shop now, and not a hedge fund). I respect Winton, DE-Shaw and Citadel for their size. I am a bit confused by, but interested in CFM.

And the small and more obscure stuff, like Pinetree.

Ich kam hierher und sah dich und deine Leute lächeln, und sagte mir: Maggette, scheiss auf den small talk, lass lieber deine Fäuste sprechen...

gmetric_Flow


Total Posts: 38
Joined: Oct 2016
 
Posted: 2020-03-03 12:46
@Maggette Interest in CFM and the likes of Pinetree just because of obscurity or something else?

Maggette


Total Posts: 1233
Joined: Jun 2007
 
Posted: 2020-03-03 12:57
More emotional bias than anything else.

Even though I am pretty sure that the published research by CFM has borderline nothing to do with what they are actually doing, I like Bouchaud (had some nice e-mail correspondence with him during my master degree).

Pinetree is IMHO quite specific on what they are doing and I find the idea of a small multy strategy fund quite interesting.
Some of their strategies probably don't scale too well (don't know though). But I think that is kind of an interesting niche. It may be hard to pitch for money from big institutions, but I think something in between a prop shop and a mega hedge fund can attract a nice set of informed investors. You can't hide behind the "collect big AUM, lock it up and relax on fee" strategy though :).

Ich kam hierher und sah dich und deine Leute lächeln, und sagte mir: Maggette, scheiss auf den small talk, lass lieber deine Fäuste sprechen...

gmetric_Flow


Total Posts: 38
Joined: Oct 2016
 
Posted: 2020-03-03 13:09
Their published research seems quite ...uhh... soft, at least what I have come across. Bouchaud has some interesting publications, but as you say, how much of it has anything to do with what they actually do one can only wonder.

Interesting points on Pinetree, had no idea. "Collect big AUM, lock it up and relax on fee" seems pretty high-Sharpe to me Smiley
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