In This Battle Arena, Warriors Are Armed With Algorithms

Alexandra Stevenson:

Six years ago, at a Foxconn plant in Guangdong, China, Mr. Chang used data analysis to figure out that the unusually cold weather outside had led to a high failure rate of the computer chips on the factory floor. The finding saved the company from significant revenue losses.

Today, he runs a hedge fund in Cambridge, Mass., that analyzes not only weather, but news and shipping reports, to make investment decisions.
To find more math whizzes who can apply their knowledge of other fields to the financial world, BattleFin's co-founders, Tim Harrington and Brian Tomeo, have created a start-up that they hope will grow into an incubator that organizes finance tournaments and provides capital to "give the little guys a chance."

"By creating a tournament, we're able to find these guys who are not on the radar screen of the larger seeders," Mr. Tomeo said.

Hedge funds have long sought out super brains who could apply mathematical concepts to financial markets. The "quant" approach was made famous in the 1970s by Robert C. Merton, Fischer Black and Myron S. Scholes. Their Black-Scholes model, which predicts the future value of stocks and bonds, spawned the growth of hedge funds.

Posted by Jim Zellmer at September 29, 2013 12:12 AM
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