Stand Alone Quant Analytics without Human Behavior Economics will not suffice by Uday Raval

The growing phenomenon of global socialism and protectionism influences the paradigm paralysis or the failure to recognize how current models of thinking are dominating investor behavior. This has become an important component of how data models are failing at predicting asset price behavior across the globe. While age-old ideas centered on quantitative modeling, number crunching, and reviews of comparatives of past performance is still widely used. Quantitative analysts ignore the nascent economic concepts that actually drive and predict pricing. This new construct is human behavior.

Simply put. Any asset price is a function of quantitative information and human behavior. Prices and yields are predictive of quantitative fundamentals and behavioral economics.

We use Human Behavioral Economics scoring, to capture and quantify sentimental data. Our calculation methodology and its component scoring are proprietary. It behaves as an instrument that captures each overt and subtle human sentiment operational in trading markets. Human Behavior Economics is a method that quantifies the subtle differences between what investors say, think and their actions.

Investment management absent Human Behavior Analytics using rules based on standalone quantitative modeling merely represents sub substandard and outdated modes of investment management.

Earlier market traders centered on antiquated quantative correlative modeling that no longer work and are yielding abysmal returns.

In delivering alpha, traditional quant analysts follow truths based on mathematics and statistical analysis. This approach merely verifies and group together evidentiary financial shifts. It ignores the fundamental proof of Human Behavior Economics while fueling trends in pre-boxed analytics. Current methodologies of investment has reached its peak and has exhausted its outperformers or the select few.

Before considering this new investment strategy, first initialize an honest analytical compilation of your portfolio’s performance. In addition, think how the historic predictors of currency behavior was brought on by social influencers, as an unexpected Brexit. This socialistic event changed forever global investment behavior. So in order to solve for social unknowns a new approach to quantifying human behavior must translate into a viable vehicle for a sound investment strategy.

This wealth building approach starts by exploring how we quantify herd mentality that alters investment sentiment. Many strategists understand the importance of quantifying how market sentiment acts on and translates into a viable tool for investment growth. Nevertheless, many fail to produce a measurement of market sentiment that will change incrementally wealth outcomes. That approach requires the next generation in behavioral predictors.

Human behavior analysis or human psychology is that meme upon which investment behavior should be reliant on and up until now, it only represented unstructured information. To become useful this information must undergo vetting and a cleaning up of unusable statistics. Raw data becomes usable information and enabled for conversion into a myriad of valuable quantitative tools ready for investment analysis. This is where the new breed of human behavior analytics in investment planning plays an important role.

There are many investor sentiment indicators and analytical tools available, but are they able to capture the real essence of human behavior analytics. In addition, are these investment applications able to exhibit an in-depth understanding of the constant shifts in current financial sentiment?

Uday Raval

Barbara Cerda, Editor

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