Quantitative Investing

Statistically speaking

In our last post, we defined the goal of an investment strategy, showed how comparing strategies may not be as straightforward as one would imagine, and outlined some critical questions that need to be answered when weighing competing strategies. In this post, we’ll look at what an investment strategy’s main constraints — namely, return and risk — actually imply. What do the numbers say? Assume you’ve chosen the strategy and assume it’s simple: invest in a large index of stocks, namely the S&P500.

Stocks for some run

Motivation This string of posts is meant to help non-professional investors understand some of the complexities involved in choosing an investment strategy, suggest a logical framework on how to do just that, and offer different ways to analyze the data that motivate the strategies we’ll examine. Strategies for the long run Investment strategies and styles abound — from fundamental to quantitative to technical. For the professional investor how much credence one gives to each approach depends as much on education, training, and employer as on open-mindedness and opportunity cost.