Quant Fund

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.

RELATED TERMS
  1. Quantitative Analysis

    A business or financial analysis technique that seeks to understand ...
  2. Quantitative Trading

    Trading strategies based on quantitative analysis which rely ...
  3. Quantitative Easing

    An unconventional monetary policy in which a central bank purchases ...
  4. Rocket Scientist

    In the world of finance, these are people with science and math ...
  5. Investment Fund

    A supply of capital belonging to numerous investors that is used ...
  6. Attribute Bias

    The tendency of stocks selected by a quantitative technique or ...
Related Articles
  1. Trading

    Top Skills Of The Best Quant Traders

    Lured by high salaries and perks of quant trading? Find out what skills and traits you need to become a quant trader.
  2. Trading

    Quants: What They Do and How They've Evolved

    It sounds exciting to be a quantitative trader, but what do they do? Here's a sneak peak into the world of a "quant."
  3. Trading

    A Simple Overview Of Quantitative Analysis

    All of the potential highs, lows, and sentiments associated with investing can overshadow the ultimate goal—making money. The “quantitative” approach to investing seeks to pay attention to the ...
  4. Trading

    What is Quantitative Analysis?

    Quantitative analysis refers to the use of mathematical computations to analyze markets and investments.
  5. Managing Wealth

    Quantitative Analyst: Career Path & Qualifications

    Learn about the work that quantitative financial analysts do everyday, and determine what it takes to become a successful professional in the field.
  6. Professionals

    Financial Careers: Analytical Jobs

    By Brian Perry In this chapter we will look at finance jobs for individuals that like to look at "the big picture" by analyzing the economy or the broad financial markets. There is a great deal ...
  7. ETFs & Mutual Funds

    Stop Paying High Mutual Fund Fees

    Discover how investment strategies and expense ratios impact your mutual fund's returns.
  8. ETFs & Mutual Funds

    Top Bachelor Degree For A Hedgefund Career

    From economics to statistic analysis, certain bachelor's degrees make graduates more qualified for landing highly sought hedge fund jobs.
  9. ETFs & Mutual Funds

    Want To Work At a Hedge Fund? These Are The Top Entry-Level Jobs

    Lucrative salary, high perks, and best quantitative brains at work - Here are the common entry level positions for those aspiring for a career in hedge fund industry.
  10. Markets

    How Quantitative Easing Affects the Labor Market

    The Federal Reserve used quantitative easing to aid economic growth. QE has impacted many areas, including the labor market, but are the effects good?
RELATED FAQS
  1. How legitimate are companies that advertise debt consolidation for all my credit ...

    Learn about how fundamental analysis ratios can be combined with quantitative stock screening methods and how technical indicators ... Read Answer >>
  2. What percentage of a diversified portfolio should be exposed to the insurance sector?

    Learn how it is critical to innovate and improve financial models and techniques used in quantitative analysis, and understand ... Read Answer >>
  3. In what instances is quantitative easing used?

    Discover when, how and why the Federal Reserve and other central banks turn to quantitative easing to stimulate economic ... Read Answer >>
  4. How do quant traders build the relative strength index (RSI) into their algorithms?

    Learn how quantitative traders build the relative strength index (RSI) into their algorithms. Explore how automated trading ... Read Answer >>
  5. What impact does quantitative easing have on banks in the U.S.?

    Read about the economic impacts of quantitative easing on banks in the United States. Find out why some are concerned about ... Read Answer >>
  6. When the Federal Reserve Bank engaged in Quantitative Easing, did it add to M1?

    Learn how quantitative easing affects the money supply and what banks do when quantitative easing is in effect. Find out ... Read Answer >>
Hot Definitions
  1. Brazil, Russia, India And China - BRIC

    An acronym for the economies of Brazil, Russia, India and China combined. It has been speculated that by 2050 these four ...
  2. Brexit

    The Brexit, an abbreviation of "British exit" that mirrors the term Grexit, refers to the possibility of Britain's withdrawal ...
  3. Underweight

    1. A situation where a portfolio does not hold a sufficient amount of a particular security when compared to the security's ...
  4. Russell 3000 Index

    A market capitalization weighted equity index maintained by the Russell Investment Group that seeks to be a benchmark of ...
  5. Enterprise Value (EV)

    A measure of a company's value, often used as an alternative to straightforward market capitalization. Enterprise value is ...
  6. Security

    A financial instrument that represents an ownership position in a publicly-traded corporation (stock), a creditor relationship ...
Trading Center