The Derivative The NON-Wisdom of Crowds with Nigol Koulajian of Quest Partners
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May 6, 2021 Nigol Koulajian is the Founder and CIO of Quest Partners, a systematic trading firm with $1.8 billion in assets under management. In this engaging conversation, he discusses his transition from engineering to futures trading and the critical role of mindfulness in high-pressure investments. Nigol shares insights on managing tail risk, leveraging positively skewed trades, and the complexities of the financial industrial landscape. He also emphasizes the importance of meditation for better decision-making and clarity, all while showcasing his journey through the unique challenges of Wall Street.
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Seven-To-Ten Day Window For Skew
- Quest found seven-to-ten day timeframes offer better positive skew with manageable transaction costs.
- Long-term trend following has lost positive skew due to market structure changes and crowding.
Crowding Kills Backtest Alpha
- When a factor works, capital quickly chases it, crowding and destroying the edge.
- Many high simulated Sharpe strategies fail live because market impact and crowding differ from backtests.
Don't Chase High Sharpe Blindly
- Don't trust raw backtested Sharpe as a safety metric because it often reflects embedded tail risk.
- Evaluate strategies for skew and potential tail exposure before allocating capital.