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The stockmarket is now run by computers, algorithms and passive managers

#artificialintelligence

FIFTY YEARS ago investing was a distinctly human affair. "People would have to take each other out, and dealers would entertain fund managers, and no one would know what the prices were," says Ray Dalio, who worked on the trading floor of the New York Stock Exchange (NYSE) in the early 1970s before founding Bridgewater Associates, now the world's largest hedge fund. Kenneth Jacobs, the boss of Lazard, an investment bank, remembers using a pocket calculator to analyse figures gleaned from company reports. His older colleagues used slide rules. Even by the 1980s "reading the Wall Street Journal on your way into work, a television on the trading floor and a ticker tape" offered a significant information advantage, recalls one investor. Since then the role humans play in trading has diminished rapidly. In their place have come computers, algorithms and passive managers--institutions which offer an index fund that holds a basket of shares to match the return of the stockmarket, or sectors of it, rather than trying to beat it (see chart 1).


Hedge Funds Are Training Their Computers to Think Like You

#artificialintelligence

Hedge funds have been trying to teach computers to think like traders for years. Now, after many false dawns, an artificial intelligence technology called deep learning that loosely mimics the neurons in our brains is holding out promise for firms. WorldQuant is using it for small-scale trading, said a person with knowledge of the firm. Man AHL may soon begin betting with it too. Winton and Two Sigma are also getting into the brain game.


Data Nerds Struggle to Gain Power at Hedge Funds

#artificialintelligence

As hedge funds embrace the cool calculations of big data, they find themselves wrestling with something far more human -- a struggle for power. The firms have been loading up on data scientists and coders to deliver on the promise of quantitative investing and lift their ho-hum returns. But they are discovering that the marriage of old-school managers and data-driven quants can be rocky. Managers who have relied on gut calls resist ceding control to scientists and their trading signals. And quants, emboldened by the success of computer-driven funds like Renaissance Technologies, bristle at their second-class status and vie for a bigger voice in investing.


Hedge Funds Are Training Their Computers to Think Like You

#artificialintelligence

Hedge funds have been trying to teach computers to think like traders for years. Now, after many false dawns, an artificial intelligence technology called deep learning that loosely mimics the neurons in our brains is holding out promise for firms. WorldQuant is using it for small-scale trading, said a person with knowledge of the firm. Man AHL may soon begin betting with it too. Winton and Two Sigma are also getting into the brain game.