#Goodtimes qma full#

The strong influence of human emotion on investor behaviour – so the theory runs – leads to mispricings and, ultimately, investment opportunities. This, of course, is Keynes’ famous ‘animal spirits’ theory – his belief that many investors’ decisions have more to do with spontaneous feelings of optimism than a rational weighing up of probabilities. Keynes recognised a long time ago that market behaviour is not necessarily about the markets converging to a true fair value, but rather a beauty contest in which conventions arise, consensus views emerge and people gravitate towards the consensus.” But if you’re operating in an atmosphere of pure uncertainty, that’s actually impossible – and therefore the whole edifice begins to crumble. The efficient markets hypothesis tends to get coupled with the rational expectations hypothesis, whereby you assume that people have a common model that they all agree on and that they can form a common view of where market prices should be. “Once you have that as a starting point, a lot of the stuff that efficient markets hypothesis is based on starts falling away. “There are so many things we know so little about that it’s very difficult to form a probabilistic view.” “Keynes recognised a long time ago that most of the decisions we have to make are made in situations which almost resemble pure uncertainty – and I mean uncertainty in a Knightian sense, not a measurable risk sense,” he says. He cites Keynes’ rejection of the idea of perfectly efficient markets as being particularly influential. The influence of Keynes stems from Dr Wadhwani’s days as a student and remains core to his investment philosophy. Although it will be run as a separate entity to Dr Wadhwani’s offshore strategy, it will incorporate the same combination of Keynesian economics and quantitative modelling. The strategy aims to produce attractive net absolute returns using trading strategies to invest in equity and fixed income markets globally. In partnership with Dr Wadhwani, GAM launched a UCITS III product on April 6.

Over the same period, the MSCI World index gained 3.1% per annum with a standard deviation of 17.3%. And it is an approach that has borne considerable fruit: since the models began trading over 5 years ago, the US dollar class of the company’s offshore strategy has achieved annualised compound growth of 11.7%, with an annualised standard deviation of 13.6%. The company’s approach fuses Dr Wadhwani’s two chief passions – quantitative modelling and Keynesian economics. In 2003 he established Wadhwani Asset Management, a London-based asset management company that specialises in systematic macro investing. People were very passionate about what they did, and it’s then inevitable that people will disagree because they all believe that their own views are the correct ones.” “Those meetings used to get very fraught – it certainly wasn’t a tea party. However, he admits that this ‘multiplicity’ frequently led to conflict. “It was fascinating to see how people on the inside did their modelling and witness the multiplicity of models they used,” he says. Between 19, he was a full-time member of the Bank of England’s Monetary Policy Committee, where he gained exposure to a range of different approaches to modelling. Obviously, I was delighted.”ĭr Wadhwani has been involved in quantitative modelling for more than 25 years now, successfully combining academic research with practical application.

#Goodtimes qma full#

One day they asked me if I would join them full time and soon after that I took up the position of director of global equity strategy. “But I started doing some research for Goldman, including creating quantitative models, and I found I rather enjoyed it. “Prior to that I thought I would remain an academic,” he says. This caught the attention of Gavyn Davies at Goldman Sachs, who offered Dr Wadhwani a position as a consultant.

Influenced by the work of Nobel Prize-winning economist Franco Modigliani, who was exploring the same issue, he published some empirical work linking the low P/E ratios with inflation. I found it all quite puzzling,” he says.Ī few years later, Dr Wadhwani was a postgraduate student working on a thesis examining why P/E ratios were so low. “I remember watching the Hang Seng plummet, and being amazed by how it fell so far so quickly. He was already an avid follower of the markets by then, and recalls watching in awed fascination as the 1973-74 financial crisis struck. Dr Sushil Wadhwani was still a teenager when he experienced his first financial crisis.