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What Does It Take To Find Alpha These Days? Financial Advisors' Daily Digest


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By SA Gil Weinreich :

The curriculum for the CFA exam - thought of as the gold standard in the investment management world - is changing to include investment algorithms and big data, according to a Reuters report.

Candidates will not be expected to code computer programs, but rather distinguish between structured and unstructured data analytic methods as well as identify characteristics of robust investment algorithms," the CFA Institute's director of credentialing is quoted as saying.

What does this signal? In reading the above-linked news, I hearkened back to a comment by one of the active participants on this forum, Hawkeyec, who wrote :

…when we see the fast growing takeover of market action by electronic trading programs and their complex algorithms and strategies…changes in the market can take place in a flash when these programs cause huge bets on this or that strategy that can have a global impact of unknown dimensions. To sit around loading up on information that purports to understand all this stuff when the average investor can never mimic these strategies is silly. There's an old Eastern aphorism that says: "When elephants fight, the grass dies." I know I'm grass even though I enjoy some measure of financial independence. The only way I can maintain that position is to grow somewhere far away from the elephant cage."

The CFA curriculum change leaves the impression that finding alpha today requires this elephantine effort at data crunching. Even if not, I think it's better to take hawkeyec's approach, following a simple plan whose success is not dependent on trying to outsmart everyone else.

As always, please share your thoughts in our comments section. And below please find today's financial advisor-relevant links:

See also Closing The Book On InvenSense: News Lessons For Modern Markets on seekingalpha.com

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.





This article appears in: Investing , Stocks
Referenced Symbols: AMZN



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