Democratize Quant 2019 Recap

We did it. We democratized quant for one more year. Last year, we suffered through a 50% drawdown in attendance due to a perfectly timed snow storm. This year the weather cooperated with us and we were able to get everyone there.

Full access to presentation videos and the accompanying slides (when available) are available on the following recap website. (content is password-protected as per compliance requirements from some of the attendees).

The Dem Quant Kick-Off BBQ

We kicked things off the night before (Wednesday) at Alpha Architect’s Global Headquarters in Broomall, Pennsylvania.⁽¹⁾ This year we also were able to welcome people to an authentic Philly experience with cheesesteaks from Thunderbird, soft pretzels, and tomato pie.

Here’s a shot of some of the happy customers:

The next morning we kicked things off with a presentation from Ben Johnson on Trends Shaping the Asset Management Industry.

One slide from Ben started the avalanche of questions and audience participation that continued for the rest of the day:

This slide caused a lot of debate on something that’s been talked about a lot for the last few years, “Active vs Passive,” but it also brought some data to the debate to help us frame things.

Eric Balchunas (jokingly termed the CEO of Bloomberg by Wes) came up and expanded on Ben’s thought and added a few critiques. Some of what Eric discussed is in his most recent blog post. Eric and Ben made for good sparring partners, but no actual blood was spilled. Maybe next year!

Next up was Antti Ilmanen of AQR to discuss Who Is On the Other Side? This presentation was a best effort to determine if factor investors have a natural trading counterpart in the marketplace.

Brought up to discuss Antti’s presentation was Corey HoffStein of NewFound Research. Corey summarized Antti’s work well and had interesting points to potentially improve the research. All of Corey’s work was enhanced by his use of Muppets. Corey truly was Democratizing Quant because I understand things best when told through stuffed animals.

We ended the discussion with Antti and Corey by pairing them up on a panel with two hardcore traders, Chris Hempstead of Deutsche Bank and Bryan Johanson of RBC. The panel was moderated by Villanova Professor Michael Pagano. The pupose of the panel was to blend two potentially conflicted asset managers with two potentially less conflicted traders to attempt to get closer to a truth when it comes to factor investing and trading. The audience egged this dynamic on and brought some questions that probably can’t be restated here!

This took us into our lunch presentation/keynote with Rich Evans, Phd and proffessor for the University of Virginia Darden School of Business. Rich presented on Corporate Political Activity and Stock Returns. This presentation helped shed some light on something we all think we know, but never had the data to show: Corporate Political Activity (i.e. lobbying) seems to help the companies’ stock prices that engage in it. But how much? The short answer from Rich’s research was that it seemed to help, but not as much as previous research had shown.

The next in line was Andy Berkin, PhD of Bridgeway Capital Management to present on What’s Up with Momentum? The purpose of the presentation was to describe momentum investing and when and why it may work (or not!). Andy’s dry sense of humor got us back into it after lunch. And he did his job in making us feel simultaneously more confident in momentum as a viable investment strategy and less confident in it. The more you learn, the less you know…

Mikhail Samanov had little time to prepare his response as our partner Tommi Johnson, PhD had to cancel last minute. Being one of the leading experts on Momentum investing though, it was no sweat for him. Some of the data he has on momentum investing (dating back over 200 years!) was extremely interesting to see. Here’s one interesting chart he showed instead that highlights the similarity in behavior of the momentum factor in the Great Depression and the Great Recession (a sharp decline, followed by flat returns):

In that tough 3:30 time slot when everyone’s just about ready for a nap, we had a presentation that woke us all right up with some eye-popping statistics. Wei Liu and James Kolari presented on their cutting edge research A New Asset Pricing Technology: The ZCAPM. This brought some good debate between the practitioner world and the academic world and everyone is excited to see this research when it is published. Liquen Ren, Head of Modern Alpha at Wisdomtree, was the discussant on this paper as the “pracademic” ⁽²⁾. Liquen may have had the line of the conference when she said, “With great t-stats comes great responsibility,” for a good laugh by the audience.

We then brought up the previous four presenters for a moderated panel led by “The Pride of Delco” Dr. Jack Vogel. The panel included Kolari, Liu, Ren, Samnov and Berkin. Jack took them through a discussion that enabled the audience to further ask questions on what they presented. No photos exist of this panel. You’ll just have to trust me that it happened.

After that, we had our two closing talks at the conference. The first was a “fireside chat” type interview of Jim O’Shaughnessy of Twitter GIF fame (and he also is chairman of a little known shop called O’Shaughnessy Asset Management and author of multiple books). Jim covered good lessons for the audience to take away that can be applied beyond finance, with a particular focus on family.

For the final portion of the conference, we had a dinner and an interview of Annie Duke, professional poker player and author of the book Thinking in Bets, by Alpha Architect’s CEO Wes Gray. Wes worked hard to have Annie help us break the groupthink that existed in the room. Asking questions like, “How do you think of a bet like investing, where you have to make a bet today and won’t find out if you’re right for 50 years?”

Annie answered these questions with a different view than many of us did before and we walked away ready to go beat our friends and family at the next poker game. We were all a little less sure about our investing beliefs than when we walked in the room however.