Hello and welcome. You are listening to Patrick Boyle on Finance, a podcast exploring ideas from quantitative finance, examining events occurring in markets right now and financial history to see what lessons can be taken away, including interviews with some of the most interesting people in the world of finance. To learn more about the podcast, visit onfinance.org.

Welcome back to Patrick Boyle on finance. As most of my regular viewers know, I've been a trader for over 20 years,

and from the very start of my career, I've taken a quantitative for over 20 years and from the very start of my career I've taken a quantitative

approach to researching and executing trading strategies. A quant trader is just a trader who builds

statistical models to test trading strategies rather than relying on intuition and experience.

Quants try to take a scientific approach and work out what drives

price changes in markets. This approach really appealed to me in my early years as a trader

because I had no experience to rely on and I was able to look at what other people did and

test all of the different approaches to see which rules worked and which

ones didn't. Today the approach still appeals to me, both because I've become good at testing

systems but also because I feel that removing emotion from trading tends to improve returns.

When you look at the returns of different quant traders, you'll often notice that

there's not an awful lot of overlap, and that's because different traders look for different

types of trade that appeal to them. Different traders will have different risk management

rules, trade different financial products, or just have differing opinions as to what the cutoff is

for a good trading signal.

Thus as long as they're not trading a cookie cutter strategy, you wouldn't really expect

them to be highly correlated.

As traders and investors, we can learn a lot about how to approach a problem based on how

people have tackled similar

problems in the past. So let's take a look at the history of quantitative trading.

You might expect me to begin this story in the 1960s, but we're going to go back a bit further

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