Will Continual Learning Trump Experience?

A new technology called continual learning (CL) enables computers to apply accumulated knowledge to make better decisions in the future and is considered “one of the hottest threads of artificial intelligence (AI) research.” This according to an article in CFA Institute. “It may prove to be the single most disruptive technology for investment management,” the article says, adding that CL may be better able to apply objectivity to the investment decision-making process than humans do.… Read More

Five Questions: Machine Learning in Investing with Kevin Zatloukal

By Jack Forehand (@practicalquant) — Artificial intelligence and machine learning are going to change investing in many ways. The ability of computers to think, analyze data, and react more and more like human beings has the potential to change everything from how advisors interact with their clients to how investment strategies are created to the fees that are charged for investment advisory services. While very few people dispute the potential for these technologies in investing,… Read More

Could Artificial Intelligence Fix Active Management’s Underperformance?

According to an article in Institutional Investor, the attempts by active managers to outperform benchmarks by running concentrated portfolios is being undermined by their efforts to “manage risks by diversifying into hundreds of stocks.” The article suggests that the use of “ensemble methods,” which rely on artificial intelligence and machine learning, could afford firms the opportunity to use “the highest conviction picks of multiple managers, rather than the single manager employed by most active funds,… Read More

Founder of Winton Capital Talks Artificial Intelligence

A Barron’s article offers an interview with David W. Harding, who founded Winton Capital in 1997 and has grown the fund company to nearly $27 billion in assets in 8 offices around the world “by deploying high-powered computers to crunch data and pick up potential trading signals and ascertain patters in markets.” In the interview, Harding “eagerly discussed artificial intelligence,” the article says, which he believes is “overhyped.” Here are some highlights: The idea that… Read More

Discretionary Meets Quantitative Investing in Artificial Intelligence

The advent of artificial intelligence may bridge the gap between the subjectivity of discretionary investing and the rigidity of quantitative investing, according to an article in CFA Institute. Recent developments in machine learning have created exciting possibilities to combine the two investment philosophies,” the article reports. “Now quantitative investors can find much more intricate and non-linear relationships among the fundamental factors that drive investment returns.” On the other hand, it adds, AI will allow discretionary… Read More

Artificial Intelligence and Stocks

Yin Luo, head of quantitative research, economics and portfolio strategy at Wolfe Research, is a longtime champion of artificial intelligence (AI) and its potential to transform investing, according to a recent interview with Barron’s. While Luo but doesn’t think that robots will replace money managers soon, he does believe that machine learning can give investors an edge. Here are some highlights of the interview: Machines investing on their own, says Luo, is a outlandish concept.… Read More

Howard Marks: Computers Won’t Replace the Best Investors

In his recent memo entitled, “Investing Without People” Oaktree co-founder Howard Marks argues that passive and quantitative investing will all help keep markets efficient and reduce costs for investors. This according to an article in The Wall Street Journal. But while active managers have underperformed their benchmarks for years while charging high fees to investors, Marks doesn’t think the strategy is “dead,” adding, “I doubt computers can do what the very best investors do.” The… Read More

Some Thoughts on Howard Marks’ Most Recent Memo

By Jack Forehand (@practicalquant) —   Howard Marks’ memos provide some of the deepest and most thought provoking insights in the investing world today. They are on par with Warren Buffett’s annual letters as one of the few must reads in investing today. Marks just recently posted a new memo, and the topics he covered were very close to home for me as someone who believes in quantitative and factor-based investment strategies.  The memo was titled Investing… Read More

Artificial Intelligence is About to Hit Your Portfolio

“Ask almost any money manager what they’re most interested in these days and it’s not proselytizing new investing styles—it’s artificial intelligence,” says a recent Barron’s article. “Artificial intelligence is the ultimate competitive edge.” The article quotes Andrew Lo, MIT’s director of the Laboratory for Financial Engineering, who says, “We are in a technological arms race. Financial institutions have to participate just to keep up with the competition” for cost savings, among other things. Delving into… Read More

BlackRock’s New Suite of Funds to be Led by Robots

Blackrock Inc., the world’s largest asset manager, is “turning to robots to drive its latest push into active exchange-traded funds,” according to a recent article in Bloomberg. The article reports that, according to a recent statement by the firm, the funds (under the brand “iShares Evolved”) will choose holdings in industries such as technology, innovative health care and media entertainment based on machine learning and natural language processing. According to Jeff Shen, co-head of investments… Read More