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Insights

2

Short is the New Long

Kathryn Kaminski, Chief Research Strategist and Portfolio Manager at AlphaSimplex, will be moderating a panel at our upcoming Time Summit on April 30th / May 1st, in Pinehurst, NC. This panel will be preceded by a presentation from David Dunning, social psychologist and professor of psychology at the University of Michigan, where he will showcase his work on hypocognition – “the lack of linguistic or cognitive representation for an object, category, or idea.” In other words, hypocognition characterizes behavior in the presence of unknown unknowns. The panel will focus on the implications of hypocognition and how this could be applied to investments and finance.

Alternative data

There was a piece in the Financial Times last week entitled “New crop data providers cash in on US shutdown” (paywall). It detailed how the US government shutdown impacted many areas of businesses from the National Transportation Safety Administration to the USDA. The USDA crop reports were interrupted for an extended period of time, leaving many agricultural traders in the dark on government reported stocks of soybeans, corn, wheat. Third party alternative data providers have stepped in to fill the gap, using their own process of data collection and predictive analysis to produce their own set of balances.

Process is more important than approach

There was an opinion piece recently posted on Bloomberg titled “Why the Quants Aren’t Adding Up.” In it, Satyajit Das describes why the recent relative underperformance of quantitative strategies (by his measure) is indicative of fundamental problems inherent to the technique. It’s the best, most vivid example I’ve yet found of confusing process (the steps taken to make a decision) and approach (the tools chosen to implement process).

Unknown Unknowns and the Problem of Hypocognition

I came across this Scientific American article in August and was struck by its relevance to a number of conversations we were having with investors. Without going into great detail, we were discussing a couple of investment opportunities that could be classified as esoteric or “off the run.” In many of the initial conversations, investors were trying to dig deeper into the opportunity in order to find an analogous thread that they could follow back to a previous investment or experience. While this is extremely valuable in helping suss out the types of risk inherent in any possible investment, what if the exercise misses the mark completely? What if we are applying our past experience incorrectly, neutering our ability to assess something that is truly novel?

Approaching Exponential: Could a clean energy future arrive faster than you think? (Jon Creyts)

  Renewable energy and low carbon-technology are coming at an increasing rate and may have a serious impact on the underlying fundamentals in the capital markets. Jon Creyts, Managing Director of the Rocky Mountain Institute, offers his insights into the ways in which our future will be shaped by these changes and the implications it will have on current business models.

Recent Trends in High Frequency Trading (Christina Qi)

  Starting in 2013 Domeyard did what today sounds impossible: build an investable HFT firm from scratch. The firm believes a meaningful part of its success is due to its highly flat managerial structure and diverse team. The unique culture allows them to attract talent in a highly competitive sector. In addition to establishing an appreciation for the technical challenges of HFT, Christina discusses talent acquisition and culture development as dimensions for competitive advantage.

Dawn of the New Everything: An Evening Lecture by Jaron Lanier

    Many are waking up to the ways in which the internet and social networking influence our actions and have created “behavior modification empires.” How did we get here and is there any hope of a redesign that will save us from our addictive selves? If this future vision includes the individual sovereignty of data, what are the implications for machine learning and big data algorithms?

Dispelling the Myth of Crypto “Currencies” - Olaf Carlson-Wee

  While the media focuses on Bitcoin and it’s value as a digital store of value or censorship resistant global currency, many are building and investing in the future of the internet…not currencies. Olaf will discuss investing in internet protocols and how they will capture a majority of the value in a future built on decentralized, blockchain technology.

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