Pages Navigation Menu

Everything Personal Finance

Why Investors Need And Respect Quants

Thanks to movies and drama shows about the financial world, you would think that economies are run by madmen, making decisions fast and loose. It’s actually quite the opposite because, in the real world, nobody wants to lose their money. Sure you have the odd crazy people whose life then goes on to be portrayed in Hollywood movies such as ‘The Wolf of Wall Street. However, these are the very rare characters that perhaps wouldn’t survive in this day and age. What every Wall Street firm does have is a whole team of quantitative analysts that are void of some of the behaviors they exhibit. Quants are like the scientists or mathematicians of the financial world. To them, data, graphs and consumer reports are there to be studied in great detail. The reports they make from this evidence will then go on to be formulated into models. These models are then used by investment banks, businesses, private investors, hedge, and mutual funds, etc., to make important financial decisions.

Investors need them

 

If you’re going to put your money into a stock or trade that you hope will make you a large profit, shouldn’t you be doing so with more than just hope? That’s where the quants come in because they will work with traders providing them with pricing knowledge. Stocks don’t go in and out of the trading floor for no reason; there are reasons behind their rise and fall. Quants will study the consumer trends that make a certain product type more attractive to the masses than others. They look at financial quarter data, look at the type of people who bought such products, why and what price range is the most optimal for producing the highest number of sales. Quants will take all this into consideration and use algorithmic trading software to create models. Accountants, financial advisors, and hedge fund managers will use these models to make predictions about where the next boom is going to come from. The software used for these models is reliable because they utilize backtesting engines to optimize extremely sophisticated automated trading strategies.

 

‘Where they operate’

Quants are some of the most important people in the financial world. Every bank and investment firm wants to snap as many of them up as possible. That’s why they’ll be working in the top banks all over the world. They almost always reside in the capital cities of every nation in the world, and many of them have the option of working in the government. Governments themselves want to keep an eye on the economy and see how their respective nations are being affected by their policies. Therefore working in the financial departments makes perfect sense for some. However, government jobs don’t nearly pay as much as private companies do so working in major financial centers is their first choice.

 

If you’re going into battle, you need a level-headed general who knows about the landscape, terrain, how many fighting men you have and what your true capabilities are. This is exactly the type of person a quantitative analyst is to investors. Investments are not a roll of the dice; they’re made using models that have been made by the study and conclusion of incredibly complex data.