Quant Bust 2020

Zura Kakushadze

World Economics, 2020, vol. 21, issue 2, 183-218

Abstract: We explain in a nontechnical fashion why dollar-neutral quant trading strategies (e.g. statistical arbitrage) suffered substantial losses (drawdowns) during the COVID-19 market sell-off. We discuss: (i) why such strategies work during “normal†times; (ii) the market regimes when they work best; and (iii) their limitations and why they “break†during extreme market events. An accompanying appendix (with a link to freely accessible source code) includes back-tests for various strategies, which put flesh on and illustrate the discussion in the main text.

Date: 2020
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Persistent link: https://EconPapers.repec.org/RePEc:wej:wldecn:792

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