Quantitative managers are rushing to build new models in
order to find new ways of extracting alpha from their
Managers of statistical arbitrage strategies that target
U.S. equities are finding themselves in the unenviable position
of waging an arms race of sorts, frantically building new
quantitative models and approaches to eke out alpha in an
environment where overcrowding has severely curtailed return
The race to develop models to gain a strategic edge is
nothing new in the history of modern stat arb. But the pace has
become quite fevered in recent years as returns have come under
increasing pressure due to a number of structural changes that
have conspired to create systemic woes for even veteran
arbitrageurs. The proverbial 'edge' that stat arb players seek
out is becoming harder to find.
What's changed over the last few years? Factors include a
sharp drop off in barriers...