Mon, Dec 6, 2021
Welcome Guest
Free Trial RSS
Get FREE trial access to our award winning publications
Alternative Market Briefing

French quant house uses data to understand what the market practitioners think, not to understand the market itself

Monday, January 25, 2021

Julien Messias
B. G., Opalesque Geneva:

Quantology Capital Management is a Paris-based hedge fund and specialist of behavioural finance. Its motto is "No beliefs, only processes". It has emerged as one of the best absolute return houses in France in the last couple of years.

Julien Messias, portfolio manager and co-founder, will present in the webinar, Investor Workshop: The Seven Keys to Behavioural Investing, tomorrow at 10 am EST.

Quantology's investment philosophy rests on four pillars, Messias explains, namely, psychology, quantitative finance, systematic investing and collective intelligence.

On the psychology side, the managers believe equity market opportunities are mainly linked to behavioural biases, and that the psychology of investors does not change over time. So exploiting it creates a robust source of alpha.

"We exploit behavioural basis dating back to more than 50 years in the academic literature," he says. "We think that equity markets are highly unpredictable Thus we only work on corporate event-driven opportunities that create robust price momentum."

On the quantitative finance side, the firm has been developing a proprietary quantitative and textual database for the last seven years. The managers are R&D-centric, with a four-people team entirely dedicated to crunching data and testing strategies.

"The real wealth of a quantitative asset management company relies on algorithms, but it relies even more on the databases it has been able to collect and on their 'cleanness'," he explains. Indeed, 50% of the managers' time is dedicated to reading papers or books by psychologists, sociologists and biologists.

The systematic side is applied on the basis that discretionary decisions cost a lot of alpha, as in fast markets rationality disappears behind fear or exuberance. So rule-based strategies are in order.

"Human beings are weak when trying to moderate their emotions," Messias says. "For example, at Quantology Capital we avoid keeping our eyes on screens with data moving up or down. At best, screens with financial data consume too much energy and are huge time-wasters. More realistically, they implicitly encourage traders to act and trade more than they should."

And finally, on the collective intelligence side, the managers think that, when facing randomness, a group of a large number of non-experts tends to outperform a group of self-proclaimed experts. The errors of the ones compensate for the errors of the others, making the collective average the best estimation or choice.

"We have no market conviction, and we really want to avoid having one!" he says. "Don't ask us to predict the level of the S&P at the end of the year. Being agnostic is the best way for us to deliver strong Sharpe and uncorrelated performances and to avoid big trading drama due to personal ego. We use data to try to understand what the market practitioners think, not to try to understand the market itself. It is a huge difference."

Related article:
11.Jan.2021 Opalesque Exclusive: French behavioural finance specialist sees no value in timing the market


Investor Workshop: The seven keys to behavioural investing
- With Julian Robertson, Tiger Management,
- Robert Zuccaro, Target QR,
- Roy Niederhoffer, R.G. Niederhoffer Capital Management,
- and Julien Messias, Quantology Capital Management.
Date: Tuesday, January 26th, 2021 at 10 a.m. EST
Register here for this free webinar:

Today's Exclusives Today's Other Voices More Exclusives
Previous Opalesque Exclusives                                  
More Other Voices
Previous Other Voices                                               
Access Alternative Market Briefing


  • Top Forwarded
  • Top Tracked
  • Top Searched
  1. SPACs: Trump-tied SPAC seeks Wall Street support, Nextdoor surges in public market debut after SPAC merger, Barrows Hotel Enterprises considers SPAC merger, Aussie SPAC targets big deal after NASDAQ IPO[more]

    Trump-tied SPAC seeks Wall Street support From Al Jazeera: Day traders and Reddit enthusiasts helped fuel a spectacular rally in Digital World Acquisition Corp shares, which reached a closing high of $94.20 last month before leveling out to recently trade around $60. The blank-ch

  2. Tiger funds change some stripes, Melvin Capital's comeback plan, What's behind Sachem Head's surge?, One of Asia's oldest hedge funds is buying distressed China debt[more]

    Tiger funds change some stripes From Institutional Investor: Falcon Edge, Light Street, Lone Pine, Viking, and Hound made significant buys and sells in the third quarter. Falcon Edge Capital Management exited its two largest U.S. long positions in the third quarter, according to

  3. SPACs: Hambro Perks eyes first London SPAC listing under new rules, SPACs churn out restatements, again, to correct accounting, Investment manager's SPAC Investcorp Europe Acquisition I files for a $250m IPO[more]

    Hambro Perks eyes first London SPAC listing under new rules From Bloomberg: U.K. venture capital firm Hambro Perks Ltd. aims to raise 140 million pounds ($187 million) listing a special purpose acquisition company in London, in what could be the market's first major blank-check offerin

  4. Opalesque Exclusive: TRF - the right product at the right time (part 1)[more]

    B. G., Opalesque Geneva: Eurex, an international derivatives exchange and a member of the Deutsche Börse Group, has been churning out its pioneering Total Return Futures (TRF) since 2016. In a

  5. Coinbase co-founder launches biggest VC fund in crypto, Valkyrie launches $100m DeFi hedge fund, Kyle Bass says the big money has been made in bitcoin[more]

    Coinbase co-founder launches biggest VC fund in crypto From the FT: Coinbase co-founder Fred Ehrsam and former Sequoia Capital partner Matt Huang have finished raising $2.5bn this month for Paradigm One, their first venture capital fund. Investors jockeyed to commit money to the fund, allo