CFO.com- Last August was a bad month for the hedge-fund industry. According to fund tracker Barclay Hedge Ltd., about 75 percent of the 2,600 or so hedge funds that reported results for the month showed a loss, of about 1.4 percent on average.<\/p>\n
The week of August 6 was particularly cruel to quantitative equity hedge funds. A number of prominent “quants,” managed by the likes of Goldman Sachs and Renaissance Technologies, suffered losses reportedly ranging from 5 percent to more than 30 percent.<\/p>\n
What happened to the quants? The question forms the title of a recent article by two researchers from the Massachusetts Institute of Technology \u00c3\u00a2\u00e2\u201a\u00ac\u00e2\u20ac\u009d Amir E. Khandani, a graduate student; and Andrew W. Lo, a well-known professor of finance at MIT’s Sloan School of Management and founder and chief scientific officer of AlphaSimplex Group, a hedge fund. Like a pair of detectives, working with indirect clues (hedge funds are famously secretive) and an investment simulation, Khandani and Lo set out to discover why the quants lost so much money.<\/p>\n