Even the Best AI Models Are No Match for the Coronavirus

The stock market appears strangely indifferent to Covid-19 these days, but that wasn't true in March, as the scale and breadth of the crisis hit home. By one measure, it was the most volatile month in stock market history; on March 16, the Dow Jones average fell almost 13 percent, its biggest one-day decline since 1987. To some, the vertigo-inducing episode also exposed a weakness of quantitative (or quant) trading firms, which rely on mathematical models, including artificial intelligence, to make trading decisions. Some prominent quant firms fared particularly badly in March. By mid-month, some Bridgewater Associates funds had fallen 21 percent for the year to that point, according to a statement posted by the company's co-chairman, Ray Dalio. Vallance, a quant fund run by DE Shaw, reportedly lost 9 percent through March 24.