CAIA Blog:  The Future Of Quant Equity  August 3, 2021

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Quantitative equity investing is having a bit of a mid-life crisis. Notwithstanding 2021, some of the most popular quantitative strategies have recently fallen on tough times. Will the same approach that has worked for many of us for several decades continue to work in the future? In a world of seemingly unlimited data and far more computing power than many of us could have imagined decades ago, what tenets of the process should we retain? Here, we endeavor to lay out a path forward and highlight what we need to do better. 

Our focus will be on what we believe to be among the most commonly implemented quantitative strategies: cross-sectional, generally bottom-up, strategies.[i] Though these sorts of strategies have been around for decades in one form or another, they really started to gain traction and market share starting in the 1990s. Cross-sectionally oriented quants have historically focused on behavioural anomalies, often revolving around notions of Value (over-reaction) and Momentum (under-reaction). Other types of approaches have also gained popularity, such as Low Volatility or Low Beta strategies. We often attempt to capture phenomena that we believe are pervasive across markets and over time in a systematic and repeatable fashion. 

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