Book Review: Investment Holy Grail Of Mathematics Masters

? ? ? James Simons is a world-class mathematician and one of the greatest hedge fund managers《 The New York Times described Simmons as an explorer, an actor, a giver and a thinker. Simmons's legendary life experience was written in the man who conquered the market. This book tells the story of the scientists in physics, astronomy, quantum mechanics, biology, mathematics and other fields led by Simmons. It is a very different development history of a group of talented people who are unconventional, have extremely high intelligence quotient and can not be tolerated by ordinary people. It is also a legend in the investment field. Their experience tells us that there is no absolutely insurmountable career boundary in the world.

Simmons is a mathematical genius. At the age of 23, Simmons received his Ph.D. in mathematics from the University of California, Berkeley. Before he entered the investment community, he did eight years of mathematics teaching and defense research, and was appointed dean of the school of mathematics at Shixi University. The most famous research achievement of Simmons is "Chen's Simmons theorem", which is cooperated with Professor Chen Shengshen, a famous mathematician in China. What is puzzling is that Simmons, who won the Veblen prize in mathematics, left academia in his 40th year and founded an investment fund.

If it is just such a story, Simmons's name may be annihilated in the hustle and bustle of Wall Street and become a big loss to the mathematical community. It turns out that this mathematical genius has the potential to be an investment master. After 20 years in the investment field, Simmons proved his success with a series of data: from 1989 to 2009, the average annual return rate of his grand medal fund was 35%, more than 20% higher than that of the S & P 500 index in the same period, and more than 10% higher than that of Soros, the financial giant, and Warren Buffet. Even in 2007, when the subprime crisis broke out, the fund's return was still as high as 85%. In 2020, which brings great challenges to quantitative investment, the grand medal fund also gets 76% of the after fee income.

Renaissance technology company founded by Simmons has become one of the most attractive quantitative investment companies in the market by virtue of complex mathematical models and algorithms for massive data analysis. After several financial crises, the grand medal fund has always stood firm, eclipsing the efficient market hypothesis. Industry insiders generally believe that Simmons' invincible myth is mainly due to his "gecko investment method", that is, making short-term directional prediction in investment, relying on trading many varieties and making a large number of transactions in the short term to make profits. However, Simmons' successful investment has not come easily.

It is generally seen that Simmons as a mathematician can easily cross the border to succeed. However, this is not the whole truth. Even the genius like Simmons has experienced various setbacks. When Simmons set up the grand medal fund in 1988, he was already 50 years old and had experienced more than ten years of setbacks in investment. It takes at least ten years for a person to become an expert in a new field. The "tuition fees" required to become investors are more expensive. The success of Simmons also has an era background, that is, the rapid development of computer and information technology after the 1990s, which makes mathematics have a place to use in the field of quantitative investment.

Simmons, together with game theory Professor Elvin burekamp, has developed a computer model that can be used to remove emotional elements from the trading process. What they do is to mine massive price data, which includes data cleaning, signaling mechanism and backtracking testing. The grand medal fund also relies more and more on its systematic autonomous learning strategy. It's a machine learning approach. However, no trading strategy is always effective, which is the reason why "never completely believe in a model" is the saying of quantitative investment.

The success of Simmons has greatly promoted the development of quantitative investment. For a long time, the reasons leading to market failure are many and complex. To win the market, we must rely on the information advantage, or we can achieve small loss and big win. The grand medal fund seized 50.75% of the opportunity and was 100% correct. They rely on the application of data science to discover the hidden multiple factors and relationships related to various stock prices hidden in big data, and find out the key multidimensional factors that are easy to be ignored by other investors, so as to obtain the information advantage to beat the market.

Simmons is not a highly technical role in the company. He is the soul of the company, responsible for guiding the company's development direction and providing resources. The company's incentive mechanism is also fairly Fair: whether employees discover new trading signals, complete data processing, or perform other low-key tasks, as long as they contribute to the development of the grand medal fund, they will receive bonus points, each of which represents a percentage of Renaissance technology's profit pool, It is based on clear and easy to understand formula. The bonus depends on the performance of the fund, not whether the boss likes it or not.

The success of Simmons' quantitative investment methodology lies in avoiding the interference of human emotions and instinctive reactions on investment. Instead of using your imagination to find strategies that are not necessarily reliable, it's better to put in a set of formulas and let the machine learn by itself and test millions of different possibilities. Simmons' practice provides investors with a feasible way to win the market in the era of big data.

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