is predicting the stock price a quant's job?

[Alfred]

Hi, everyone!

I'm really interested in stock and I want to do a job which is related with statistical arbitrage. I want to know whether predicting the stock price using the previous statistics is a quant's job?

Thank you!!

 

[Faisal]

It is a very flawed notion that a quant 'predicts' the stock market. The quants were primarily concerned with designing the financial instruments and evaluating their fair price, ie. the price such that arbitrage opportunities are not created when the instrument is bought or sold. However in the due course of a relatively short time as the market became more sophisticated, the complexity of the financial instruments increased manifolds. For such instruments, 'probabilistic models' of the movement of the market were developed which were incorporated in the derivative pricing methodology. Market modelling is not an absolute science as the stock market is hugely dependent on people's biases and rationality. There is the entire field of behavioral finance to study this. Hence in short, there is no 'prediction' as per se.

 

[Alfred]

It is a very flawed notion that a quant 'predicts' the stock market. The quants were primarily concerned with designing the financial instruments and evaluating their fair price, ie. the price such that arbitrage opportunities are not created when the instrument is bought or sold. However in the due course of a relatively short time as the market became more sophisticated, the complexity of the financial instruments increased manifolds. For such instruments, 'probabilistic models' of the movement of the market were developed which were incorporated in the derivative pricing methodology. Market modelling is not an absolute science as the stock market is hugely dependent on people's biases and rationality. There is the entire field of behavioral finance to study this. Hence in short, there is no 'prediction' as per se.

Faisal, thank you for your informative reply. I came to know a new field behavior finance. I also noted that quantitative behavior finance is a hot field in behavior finance and I think this ought to be part of the quantitative finance because many renowned professors who is doing research in quantitative behavior finance actually teaches MFE courses.

 

[physEcon]

Hi, everyone!

I'm really interested in stock and I want to do a job which is related with statistical arbitrage. I want to know whether predicting the stock price using the previous statistics is a quant's job?

Thank you!!

To beg the question, how do you define "quant"? Is a quant the same as a financial engineer?

Try this post: https://www.quantnet.com/threads/master-reading-list-for-quants-mfe-financial-engineering-students.535/ particularly the first reading.