Quant Fund

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DEFINITION of 'Quant Fund'

An investment fund that selects securities based on quantitative analysis. In a quant fund, the managers build computer-based models to determine whether an investment is attractive. In a pure "quant shop" the final decision to buy or sell is made by the model; however, there is a middle ground where the fund manager will use human judgment in addition to a quantitative model.

BREAKING DOWN 'Quant Fund'

If computers can beat world champion chess players, shouldn't they be able to beat the traders on Wall Street? That's the thinking behind quant funds, whose name comes from the term "quantitative analysis". The advantage is that computers aren't swayed by emotion, and they obviously react much faster than a person ever could. The problem is that humans have to program those computers, and even computers can make mistakes when they are programmed incorrectly. Remember the saying "garbage in, garbage out". To take advantage of the power of computers, you still have to figure out a superior investment strategy.

The term "quantitative fund" also doesn't tell you anything about the actual investment strategy being used. Any study of a company or an industry based on quantitative data can be considered a quant strategy.

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RELATED FAQS
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    Fundamental analysis is the method of analyzing companies based on factors that affect their intrinsic value. There are two ... Read Full Answer >>
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    A mutual fund can – and should – outperform a savings account. In most cases, it should not even be a close race. Savings ... Read Full Answer >>
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    Mutual funds can invest in private companies, which may come as a surprise to many investors. It is rare for a fund to have ... Read Full Answer >>
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    Generally, penny stocks are traded through the use of the Over the Counter Bulletin Board (OTCBB) and through pink sheets. ... Read Full Answer >>
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    Some penny stocks, those using the definition of trading for less than $5 per share, are traded on regular exchanges such ... Read Full Answer >>
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