Odd Lots The Important Lesson a Quant Manager Learned in 2020
Jan 21, 2021
Corey Hoffstein, CEO of Newfound Research and a thought leader in quantitative finance, shares crucial insights from the turbulent year of 2020. He discusses how traditional trading strategies struggled amidst historical market volatility and an unprecedented economic backdrop. Hoffstein explores the shift in investor behaviors influenced by central bank interventions and the challenges of trend-following models. The conversation highlights the need for adaptability in investment strategies and the importance of merging quantitative methods with human judgment during rapidly changing markets.
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2020 Performance
- Corey Hoffstein's trend-following strategies underperformed in 2020.
- The rapid market reversal was unexpected, erasing gains from risk mitigation.
Trend Following Basis
- Trend following can exploit market stress, which differs from normal conditions.
- Firms hit risk limits and de-risk, creating pro-cyclical trends.
March 2020 Positioning
- Hoffstein's trend signals turned negative around March 13th-14th, reducing equity exposure.
- The quick rebound erased gains, and slow re-entry created a delay in exposure.