Why Quant Finance’s Market Impact Is Difficult to Measure
Summary
The document considers how to assess quantitative finance’s role in global markets and why attributing market earnings or losses to it is difficult. A central challenge is defining what counts as quantitative finance: possible categories range from derivatives activity and index funds to quantitative hedge funds. Without a clear scope, estimates cannot be interpreted consistently.
One response reports conference estimates that quantitative funds manage a stated share of assets, while emphasizing that assets under management do not measure trading flows or profit and loss. It also says reliable P&L attribution data may be unavailable. Another answer recommends studying how financial models shape markets, while a further response offers a speculative view linking real-time trading to volatility and manipulation. The document does not provide a verifiable global estimate of quant-driven profits, losses, or causal market effects, so its claims are best treated as prompts for investigation rather than settled findings.
Key ideas
- Estimates of quantitative finance’s market impact depend on how the category is defined.
- Assets managed by quantitative funds do not show their share of trading flows or profits and losses.
- The document says reliable global P&L attribution data may not be available.
- Claims linking real-time trading to volatility are presented without supporting evidence.
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Full text
# What is the effect of quant finance on global markets? # What is the effect of quant finance on global markets? Attempting to get a high level understanding of the role that quantitative finance plays in the financial global markets. Open to any suggestion on how to do this, but figure a starting point might be to estimate the percents of earnings and losses globally on an annual basis attributed to quantitative finance. ## Answer by Shane (score 7, accepted) https://quant.stackexchange.com/a/953 This answers a slightly larger question than you're asking, but I highly recommend "An Engine, Not a Camera: How Financial Models Shape Markets" by Donald MacKenzie, which is part of the burgeoning field of "Social Studies of Finance". Some relevant links: - http://socfinance.wordpress.com/ - http://www.sociology.ed.ac.uk/finance/ Regarding your specific question: you would need to start by defining "quantitative finance" in this context. Does it include any derivative trading (for instance)? What about index funds (they were based on the insights from CAPM, after all)? Or do you just want to limit it to things like quantitative hedge funds? ## Answer by gappy (score 4) https://quant.stackexchange.com/a/994 I have attended a number of conferences, and the percentage of asset under management by quantitative funds is consistently quoted between 17% and 23%; these statistics are usually based on aggregates from eVestments, SEC, and European stop that, like Frankfurt, ask the sender of an order to specify the way it was created. It is likely that the percentage may have decreased in the past two years. This is not the percentage of flows, and for sure not PnL. Not sure there are any reliable data in that respect. ## Answer by user763 (score 1) https://quant.stackexchange.com/a/996 If it wasn't quant it would be something else. I rather think that the effect is due to real time which can allow manipulation more easily and so huge moves. In fact a Nobel Economist Maurice Allay did advocate to forbid real time and one quotation per day if the goal was to stabilize the effect of stock market on Economy. But of course no way that will ever happen since the rules are aimed not to stabilize but to create as much volatility as possible since it is how the big guys can profit.
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