The Quants

PUBLISHED : Sunday, 04 April, 2010, 12:00am
UPDATED : Sunday, 04 April, 2010, 12:00am

The Quants
by Scott Patterson
Random House HK$150

They were once admired. No longer, since their models were partly to blame for the financial meltdown. We're referring to quants, or specialists in quantitative finance, who trawl through data for patterns that promise profits. In The Quants: How a New Breed of Math Whizzes Conquered Wall Street and Nearly Destroyed It, Scott Patterson writes that by the early 2000s, these investors dominated Wall Street, helped by theoretical breakthroughs in the application of mathematics to financial markets. Despite the Nobel prizes and huge personal gains, these brains were not infallible; neither were their models. Schadenfreude will allow Warren Buffet types to enjoy this book: quants didn't give a whit about company fundamentals (the quality of management, for example). They relied simply on numerical variables showing how cheap a stock was compared to the rest of the market and/or how fast it had risen or fallen. Patterson, a Wall Street Journal reporter, focuses on key players, including maths professor Ed Thorp, whose gambling nous would make millions. Finger-pointing books about the crisis are now everywhere. This is one of the better ones.