Inside the Black Box: A Simple Guide to Systematic Investing - Hardcover

by Rishi K. Narang (Author)

Master the basics and intricacies of quant and high-frequency trading with the latest edition of this accessible and widely-read guide

In the newly revised third edition of Inside the Black Box: A Simple Guide to Systematic Investing, veteran practitioner and investor Rishi K Narang delivers another insightful discussion of how quantitative and algorithmic trading strategies work in non-mathematical terms. As with prior editions, this third edition is full of timeless concepts and timely updates. Supplemented by compelling anecdotes and real-world stories, the book explains the most relevant developments in the discipline since the publication of the second edition in 2013.

You'll find out about the explosion in machine learning for alphas, signal mixing, data extraction, and execution, as well as the proliferation of alt data and a discussion of how to use it appropriately. You'll also discover:

• Updated discussions of approaches to research
• Newer and more effective approaches to portfolio optimization
• The frontiers of quantitative investing

An essential and accessible treatment of a complicated and of-the-moment topic, Inside the Black Box remains the gold standard for non-mathematicians seeking to understand the ins and outs of one of the most fascinating and lucrative trading strategies, as well as quants from disciplines outside of finance looking for a conceptual framework on which to build profitable systematic trading strategies.

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In the newly revised Third Edition of Inside the Black Box: A Simple Guide to Systematic Investing, veteran algorithmic trader and investment manager Rishi K Narang delivers an easy-to-follow and insightful presentation of how quantitative and algorithmic trading strategies work in the real world. Offered in non-mathematical terms, the author discusses the most recent developments in the field since the publication of the previous edition in 2013.

You'll find compelling anecdotes and real-world trading stories that help illustrate the hands-on ideas explained within. You'll also discover explanations of the evolution of quantitative trading and the emergence of "Quant 3.0," explore the explosion in machine learning for alphas, signal mixing, data extraction, and execution, and examine the proliferation of alt data and learn how to use it appropriately.

Inside the Black Box demonstrates the relationship between discretionary investing and the overall quantitative and high-frequency trading market, along with newer, simpler, and more effective approaches to portfolio optimization. It reviews the emergence and growth of platforms and pods as a dominant force in the sector and as a new pathway for talent entering the space.

The author answers foundational and important questions about quantitative and high-frequency trading, including: How do quants capture alpha? What is the real level of discretion in quant trading? What is the difference between theory-driven systems and data mining strategies? And how do quant traders model risk?

Perfect for aspiring and practicing quantitative traders everywhere, Inside the Black Box is a jargon-free and accessible treatment of a complex and timely subject. It's sure to remain the gold standard for non-mathematicians seeking to understand the ins and outs of a lucrative trading strategy.

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Praise for INSIDE THE BLACK BOX

"Once again, the insightful Rishi Narang pulls back the covers on quantitative investing in all its forms. As investing inexorably becomes more systematic, let him guide you in understanding these increasingly important investment strategies."
-- Ronald N. Kahn, Global Head of Systematic Investment Research, BlackRock

"Rishi has been demystifying this misunderstood part of the finance ecosystem as an author and practitioner for decades. His insights are both helpful synthesis for the novice and thought-provoking challenge for the expert."
--Ben Samild, Chief Investment Officer, Future Fund

"Rishi Narang has a great gift for taking the most complex and arcane of topics within Quantitative Investing (already a complex and arcane world) and making them accessible to all readers. Few others possess Rishi's level of technical and rhetorical skill, allowing this book to be both an educational and fun read. Indeed, Rishi takes us to the very edge of the field and lets us peer inside and also imagine the future. This book is mandatory reading for all who are interested in Quantitative Investing--not just my students at MIT!"
-- Matthew Rothman, Head of Statistical Arbitrage Strategies, Millennium Management and Senior Lecturer, MIT Sloan School of Management

"This third edition is required reading for anyone who invests in quantitative funds, and strongly recommended to those who build, operate, design, or run black boxes, who will appreciate Narang's super clear, jargon free high level description of the internal workings."
-- Stephen Boyd, Samsung Professor in the School of Engineering, Stanford University

"Inside the Black Box is a comprehensive, plain-English introduction to all major aspects of systematic investing. It has earned its longstanding reputation as a canonical overview of the topic. This third edition updates and expands the treatment of predictive modeling, portfolio construction, data sources, the future of quantitative investing, and more. If you're looking for a careful, accessible on-ramp that cuts through the jargon to shed light on the ideas, stop here."
-- Jon McAuliffe, Chief Investment Officer, The Voleon Group

"Rishi does a phenomenal job of demystifying the 'black box.' Approachable and comprehensive, this book provides valuable insights to both newcomers and seasoned practitioners alike--a must-read for anyone with an interest in the field!"
-- Stefano Robbiati, Senior Managing Director, Quantitative Strategies and Research, Ontario Teachers' Pension Plan