Book Review: Nerds on Wall Street: Math, Machines and Wired Markets: David J. Leinweber: Books
Book Review: Nerds on Wall Street: Math, Machines and Wired Markets: David J. Leinweber: Books
Smart and independent thinking about the arcane world of the quant,
By S. McGee (New York, NY) -
(TOP 500 REVIEWER)
Wall Street, if you believe Ben Bernanke’s testimony to Congress last year, is an “abstraction” to most of us. And if there’s one part of Wall Street that is abstract even to large parts of Wall Street itself, it’s the world of the quant — quantitative finance, the guys who develop electronic-based investment, trading and analytical models and systems.
Dave Leinweber has been part of that world for decades, and for years he’s been showing up at conferences talking about the world of Wall Street’s nerds. Finally, he’s put his knowledge and smarts to work to explain it to even the most math-phobic person who wants to understand just what the collision between financial markets and technology means for investors, from the most sophisticated hedge fund trader right down to those of us trying to figure out what to do next with our 401(k). Markets move faster than ever before — you can now execute a trade in less time than it takes you to start reaching for the telephone (six milliseconds or thereabouts). They also move in ways that the architects of these systems — increasingly significant players — don’t readily understand themselves.
Most of the people on Wall Street who know and understand these changes and what they mean either don’t have the communication skills to make the rest of us understand; others are too busy making money or choosing to keep a low profile to share their wisdom. Those who do end up writing about quants all too often end up in one of two camps: over-simplifying what they do and telling the world how brilliant they are, or over-simplifying what it is that they’re up and deciding that they are Dr. Strangelove-style villains. Leinweber’s analysis is simple, straightforward and lucid. Above all, it’s subversively witty, encouraging the reader to roll his or her eyes at some of Wall Street’s absurdities. He takes his subject seriously, but not himself.
I recommend this highly to anyone who has a basic understanding of Wall Street but is fed up hearing about quants, electronic trading, etc. etc. and is desperate to lay hands on a straightforward work that will spell out everything they needed to know and were afraid to ask — including some questions that they didn’t know they needed to ask. I wish that more of the writing on complex financial issues being done these days was as accessible and helpful. Far too much of it feels more like taking your medicine — or dong the assigned reading for a course you’re not enjoying that much.
Full disclosure: I know Dave, read his work in galleys and am overlooking my usual policy of not reviewing books by people I know on this occasion, because I think that more than ever before it’s important to draw attention to the tiny handful of books that actually do help readers get to the point where they understand the basics of even complex finance. The more general readers that seek out this book, the better. Best of all, this book may be one part of Wall Street where you can truthfully claim to receive your money’s worth in both education and entertainment, and where you won’t feel that somehow you’ve been ripped off along the way…
Packed with trading ideas + entertaining,
By Max Dama “Business/CS/Math Student” -
The book has three parts:
1) the history of financial technology
2) alpha generation ideas
3) what quants can do about the financial crisis
The first part is hilarious. One of the many pictures is of a past president of the CME banging on a gong with a giant salami.
It’s a really irreverant look at Wall Street from the start- “In 1792, the New York Stock Exchange was a bunch of guys standing around a buttonwood tree at 68 Wall Street shouting at each other on days when it didn’t rain or snow. We like our markets to be liquid, efficient, resilient, and robust. But this is hard when all the participants have to crowd around a tree and hope for good weather. So in 1794, we see the first big technological solution: the roof. …”
From what I gather, the author was one of the fathers of AI-based trading so the second part “Alpha as Life” really stoked my imagination. I was reading along with a pencil and paper and I ended up writing down a new multi-factor trading strategy for small cap stocks along the way. The book is especially great for text-based strategies. It’s amazing how many details he shares about old trading software companies he founded which were vendors of billion-dollar funds.
The book was fascinating because of the author’s insider status over an already long and prolific career. He’s come into contact with so many famous personalities in the trading world and he has a great way of characterizing people, as, well, people. It’s almost 400 pages but I had no trouble reading it in a day.
An insider on the world of quant investing,
By Jon (New York, NY United States) -
They key to this book is that it’s written from the pov of a CS guy and not a typical hedge fund guy. The perspective is unique and offers a very interesting and exciting take on the future of financial markets. Thinking about the history of the markets over the past centuries (and not merely the last few decades) can’t help but make one feel more optimistic in these times.
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