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WSJ article: "Quantopian pays users for the algorithms that perform best"
André Pajak
posted Aug 10, 2015
Papers Q Meta

www.wsj.com/articles/an-algo-and-a-dream-for-day-traders-1439160100

Quantopian, for example, lets users create their own algorithms free of charge and pays users for the ones that perform best.

Quantopian: Please explain details. Does "perform best" mean "have the highest annualized profit"? Highest Sharpe ratio?

All I know is that Quantopian has promised to pay the authors of the algorithms that won the contest (by earning all required badges and achieving the highest score, in part through low volatility and low return, ie. low performance) and made money over the following 6 months. Not the same thing.

6 responses
Jessica Stauth
Aug 10, 2015

Hi Andre,

Quantopian is in the process of launching a crowd-sourced hedge fund where we pay algorithm authors a share of the returns their algo generates on an ongoing basis.

We start with the same basic scoring criteria from the Open paper trading competition and then dig deeper into algorithm performance using the tear-sheet analysis that Justin shared recently (e.g. stress testing, risk exposures, turnover). We are already working with the first cohort of algos that we will allocate capital to, but we're also investing into the research process of identifying algorithms that will most likely show stable, profitable out of sample performance.

You can find more detail on what we're looking for (and not looking for) in this webinar I gave a few weeks back talking about our process for selecting algorithms for the fund.

best, Jess

Disclaimer

The material on this website is provided for informational purposes only and does not constitute an offer to sell, a solicitation to buy, or a recommendation or endorsement for any security or strategy, nor does it constitute an offer to provide investment advisory services by Quantopian. In addition, the material offers no opinion with respect to the suitability of any security or specific investment. No information contained herein should be regarded as a suggestion to engage in or refrain from any investment-related course of action as none of Quantopian nor any of its affiliates is undertaking to provide investment advice, act as an adviser to any plan or entity subject to the Employee Retirement Income Security Act of 1974, as amended, individual retirement account or individual retirement annuity, or give advice in a fiduciary capacity with respect to the materials presented herein. If you are an individual retirement or other investor, contact your financial advisor or other fiduciary unrelated to Quantopian about whether any given investment idea, strategy, product or service described herein may be appropriate for your circumstances. All investments involve risk, including loss of principal. Quantopian makes no guarantees as to the accuracy or completeness of the views expressed in the website. The views are subject to change, and may have become unreliable for various reasons, including changes in market conditions or economic circumstances.

André Pajak
Aug 10, 2015

Thank you, Jessica. So you do not currently pay, but intend to pay if and when your hedge fund starts to operate, correct?

Jessica Stauth
Aug 10, 2015

We're actually pretty close to our first allocations. We're on track to sign our first algorithm authors next month. The biggest obstacle right now is track record. We're waiting for some of the contest algorithms to have 6 months of good out-of-sample history.

If you don't have your best algorithm in the contest yet, you should. Get your track record started so that we can evaluate your algorithm this winter.

André Pajak
Aug 10, 2015

So you have not made your first allocations yet, but intend to make them this winter?

Jessica Stauth
Aug 10, 2015

We intend to make the first allocations in the next month or so. We are looking for at least 6 months out of sample track record before we make an allocation - so an algorithm submitted today could be eligible for an allocation as soon as February.

André Pajak
Aug 10, 2015

Thank you for clarifying, Jessica. "An allocation in the next month or so" is not the same as paying algo writers now. You might want to contact the WSJ reporter and ask her to publish a correction.

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The material on this website is provided for informational purposes only and does not constitute an offer to sell, a solicitation to buy, or a recommendation or endorsement for any security or strategy, nor does it constitute an offer to provide investment advisory services by Quantopian.

In addition, the material offers no opinion with respect to the suitability of any security or specific investment. No information contained herein should be regarded as a suggestion to engage in or refrain from any investment-related course of action as none of Quantopian nor any of its affiliates is undertaking to provide investment advice, act as an adviser to any plan or entity subject to the Employee Retirement Income Security Act of 1974, as amended, individual retirement account or individual retirement annuity, or give advice in a fiduciary capacity with respect to the materials presented herein. If you are an individual retirement or other investor, contact your financial advisor or other fiduciary unrelated to Quantopian about whether any given investment idea, strategy, product or service described herein may be appropriate for your circumstances. All investments involve risk, including loss of principal. Quantopian makes no guarantees as to the accuracy or completeness of the views expressed in the website. The views are subject to change, and may have become unreliable for various reasons, including changes in market conditions or economic circumstances.