Interview with Tadas Viskanta of Abnormal Returns

Tadas Viskanta sat down for an interview with our Growth Hacker Simon Burns on what he sees in the future for financial blogging, the effect of Twitter data on markets and the move towards democratization of algorithmic model creation among other things. Tadas is a prolific blogger at Abnormal Returns, author of Abnormal Returns: Winning Strategies from the Frontlines of the Investment Blogosphere and long time market commentator. His views, analysis and projections for algorithmic trading, HFT and markets in general are insightful and blended from experience, extensive market reading and his own research. Enjoy our interview with Tadas Viskanta:

Simon Burns: Thank you for joining us. So before we get started, I’ll give you a little introduction on QuantConnect. We have a software solution that is all C# and allows your average investor with basic coding knowledge to build an algorithmic trading model. Very much unique and in a sentence, we like to say we are democratizing algorithmic trading or algorithmic model creation.

I’ve been reading a few a few of your pieces recently, broadly on the financial blogosphere and how its “death�, maturity or some form of development has occured. I’d be interested in hearing your thoughts, or maybe contrasting this development with the rise of twitter as a market force and for crowdsourcing investment advice.

Tadas Viskanta had a conversation with QC’s Simon Burns on the future of HFT, the effect of Twitter on markets and what his optimism on the democratization of markets.

Tadas Viskanta:  I think that Twitter and Stocktwits are definitely taking share from the blogosphere. I don’t think there is any doubt about that. But you know, I do think they are big market segments and some of what used to happen in the blogosphere has shifted over to Twitter. For widgets they are the appropriate form. Also short form, quick messaging, one to many sort of messaging..has all been taken over from the blogosphere. But I think anything that gets beyond 140 characters, the blog is still the proper format. If you think about anything quantitative you need to go to the longer form, there is really just not the space in that short form communication to make that sort of argument. Certainly just from my blogging perspective, I’ve been on Twitter and Stocktwits for a long time and I still see people join that weren’t there before joining. I think it’s all part of growing communication, it’s not better or worse just strengthening the entire pie.

Simon: In the second stage of development in financial blogging, you talked about quantitative analysis. Do you think that long form quantitative analysis is ideal for blogs and Twitter is taking the place for other forms of investment content, is there a dichotomy there?

Tadas: Sure, I mean anything quantitive with linear equations or regressions or anything with that sort of frame, you have to go to that long form. I don’t know if blogs will take more share or move more in that direction. I think there is certainly a vibrant sub-culture of quantitative blogs. Like there is anything else there is kind of a wide variety of interests, skill levels…different markets being analyzed on different time frames. So I don’t think I say anything one thing, but a variety of things are spreading out. (more…)

First New Data Set! Estimize Crowd Sentiment Data!

In our aim to provide you with the best quality, institutional level data we’re now working with Estimize.com to bring you crowd-sourced earnings estimate data.

Each financial quarter companies publish their earnings per share (EPS) and revenue figures to investors. When a company performs worse than expected, often the share price can fall dramatically, and vice versa.

Each time there is an earning announcement the Estimize.com community of 13,000 users makes predictions on what the Earnings Per Share (EPS) will be, along with the Revenue for the quarter. On average they are more accurate than Wall Street analysts 69% of the time!

For the first time you can freely use historical sentiment data to design trading algorithms! With QuantConnect you can now access estimates from the crowd into your algorithms to design powerful sentiment strategies. Imagine testing how a bad earnings announcement affects the stock price!

In your Initialize() Method:

AddSentimentData(SentimentDataType.Estimize, "IBM");

And then handle the events using the OnEstimize() handler:

public override void OnEstimize(Dictionary<string, Estimize> estimates) {
//Incoming IBM Estimate
Debug("IBM EPS:" + estimates["IBM"][0].Eps+" Rev:"+estimates["IBM"][0].Revenue);
}

See the full documentation at QuantConnect.com/docs

Intersection Between Quant and Technology

Deutsche Bank Mention

Deutsche Bank had a few nice words to say about QuantConnect in their recent news letter:

“Recently we came across an interesting company called QuantConnect that perfectly embodies the intersection between quant and technology. QuantConnect is a startup that is trying to “democratize” quant investing. Most of us, who have spent too many late nights trying to fix a recalcitrant server or debug a crashed SQL script, know that the biggest barrier to entry in quant is the IT infrastructure required to maintain a robust back-testing and production environment. QuantConnect overcomes this by offering a cloud-based platform that is pre-loaded with the data and back-testing capability that is needed to test strategies. However, the really cool feature is that once you are happy with your back-tested strategy, you can actually turn it on live, and even connect it directly to your brokerage account to trade it in real time.” - Deutsche Bank Quantitative Strategy Team

Thanks guys!

 Scheduled Upgrade

We’re rolling out a scheduled upgrade tonight, hopefully there will be no disruption and services will resume as normal 9am 4th April. If you have any questions please feel free to reach out to Jared at jared@quantconnect.com. There will be breaking API changes! These will be detailed in a following post.

Startup Offers Quant Trading for Little Guys

Originally on Hedge Fund Alert, By James W. Prado Roberts.

A new technology shop wants to bring quantitative investing to the masses.

QuantConnect is rolling out a cloud-based service that gives aspiring quant managers the tools to design and execute trading strategies and back-test their programs with historical market data. The offering promises to remove a big hurdle for many quant traders — namely, the high cost of accessing years of market data and the computing power needed to crunch the numbers. QuantConnect is offering the technology free of charge.

The New York firm has been beta-testing the service for the past year with 20-30 programmers, including computer engineers already employed at financial firms and graduate students pursuing careers in quantitative-investment management. In recent months, it has signed up nearly 600 prospective clients at conferences such as TechCrunch in San Francisco and Finovate in London — among them, dozens of Facebook and Google staffers. On March 14, QuantConnect alerted those individuals that they could begin using the service anytime. The firm also is working with the organizers of the Battle-Fin quant-trading tournament to support contestants.

In the near term, QuantConnect hopes to make money by helping clients set up trading accounts with Interactive Brokers. QuantConnect plans to charge $100 a month for access to the accounts. Down the road, the firm envisions a number of others businesses, including a hedge fund built around the strongest managers. Other possibilities include packaging the top algorithms as an exchange-traded fund and marketing individual strategies to retail investors via online brokerages.

First, however, the firm needs to raise additional capital. It has been running on $60,000 of seed money, and wants to raise another $500,000 to $1 million.

QuantConnect is accessible to investors who use the C# programming language. Programmers can design and back-test their strategies for free. They’ll only be charged when they set up trading accounts. Users currently have access to 14 years of market tick data on a basket of U.S. stocks. The firm plans to significantly expand the availability of historical data over time.

“The reason we are putting it out for free is there are huge barriers to entry into quant trading,� said Jared Broad, who co-founded the firm in 2011 with Shai Rosen. “We can break open the quant market — any engineer can try this, even if they don’t have capital to play with.�

At least one other technology shop, is working on a similar offering. The Boston firm is backed by high-frequency market maker Getco and venture-capital investor Spark Capital.

QuantConnect’s data resides on storage leased from Amazon.com. With instant access to the vast capacity, a simulation based on the 30 stocks in the Dow Jones Industrial Average could be run in a few minutes, versus a day or two on a desktop computer.

Broad, himself a programmatic trader, co-founded Stocktrack.org. Rosen previously was chief executive of Option TI.

- James W. Prado Roberts, Hedge Fund Alert

QuantConnect Offers Access to $20M Trading Capital – The Sharpe-Ratio Shootout

QuantConnect is live! The world’s most powerful back-testing platform, offering you free tick-data, with a C# coding environment so you can hack the best strategies together in minutes instead of weeks. Its fast, lightning fast. We can simulate five years of tick-data in less than 90 seconds, putting us on par with major financial institutions. And best of all – its entirely free.

But why would you design on QuantConnect?

If you design an amazing strategy on QuantConnect you’ll have a chance at winning millions in trading capital! We are proud to announce a partnership with Battle-Fin.com for their $20M Seed Capital Tournament -The Sharpe Ratio Shootout.

Battle-Fin is a Miami-based company that uses cutting edge real-time, real-capital tournaments to democratically identify tomorrow’s best trading strategies across asset classes. They run monthly tournaments to identify trading strategies, and introduce the best and brightest candidates to capital partners. Battle-Fin can guide strategies from just an idea to fully a built out hedge fund with legal, compliance, risk management and capital partners.

Register for the tournament to be part of the next round! There is no cost to enter and your strategies and intellectual property belong to you. http://hub.am/YXuuBu

Register your interest, then start designing your algorithms today!

Best,
Jared

Focus

Our vision has always been the democratization of finance technology, to lower the formidable barriers so retail investors can invest using algorithmic trading. This is an inspiring vision and has kept us working hard bootstrapping for over a year.

However; we’re geeks, building amazing algorithm development tools, so other geeks can design powerful trading strategies. We’re not market makers. That is an entire business in itself that has formidable challenges and so we’re struggling to excel at either task.

One of the best parts of the TechCrunch Disrupt Conference was the feedback; the overwhelming support from geeks, engineers, finance professionals, day traders — all who instantly understood the enormous potential QuantConnect offers to them. We had a tiny mention in TechCrunch and received over 500 visits from it, with a 20% conversion rate bringing over 100 of new members into QuantConnect, and the vast majority are engineers, just like us!

After seeking direction from very experienced advisors we will be refocusing QuantConnect to serve Engineers, Quants, Traders and Geeks. We will provide excellent tools for the design and execution of algorithmic strategies, and seek to provide them for free – to break open this market to everyone.

What does this mean for investors? We will still give you access to these strategies but through partnerships. We will plug directly into social investing marketplaces and manage the execution ourselves. We understand high-quality execution is critical for the these strategies and will provide free secure co-located servers as part of the full service: Code, Test and Trade. With your permission, institutional clients will have the option of licensing the engineer’s strategy and earning you even better returns.

We will focus our business model around two points: 1. Professional licenses of the algorithm simulator, and 2. Performance revenue sharing with the engineer. This will keep our incentives aligned with yours: 1. Provide a great simulator, and 2. Provide returns to investors.

We welcome your feedback, and are excited about the way forward!

Best Regards,

Jared Broad,
CoFounder QuantConnect

Disrupt and Finovate

The last week we covered San Francisco TechCrunch Disrupt conference and then Finovate in New York City. There was some awesome technology at both of these conferences and we met incredible people. Engineers, Investors and fellow Entrepreneurs browse the stands looking for fun new ideas and technology. We met about 300 people, and gave 300 pitches and I lost my voice by the second day!

The coolest part was the overwhelming support from the engineers, bankers and day-traders. We’re in the process of making some changes to QuantConnect which we’ll discuss in the next post. In the meantime these were our beautiful banners!

We’re Building…

Its been a quiet few weeks on the blog as we’ve had our heads down researching, sketching and building the engineer’s portion of QuantConnect – the Algorithm Lab. We’re hacking together an IDE financial algorithm designer based on your feedback.

The current design will support almost any language, and is completely flexible so you can build strategies using real code, compiled at home or on our cloud. The data will always be completely free, we have access to 6 years of all US equities, commodities, futures and options tick data.

Typically algorithm testing cycles are 4 – 12 hours, but with our infrastructure in theory we can simulate years of tick data in less than 5 minutes. It is really exciting and something no one else has ever done before.

Its a steep learning curve and all done with no funding. But all in all, it is great fun and we are applying lean entrepreneurship.

TechCrunch Disrupt San Francisco

We will have a stand and private clickable demo at the TechCrunch Disrupt Conference in San Francisco Sept 9th-12th. If you’re in town it would be great to meet you! We’ll be in the “Chilean Pavilion”.

San Francisco to New York

We’ve had a busy few weeks! After diligently preparing, Danielle and I boarded a plane to San Francisco and set out to explore the US. After a long 22 hour flight, with stop overs in El Salvador and Lima, we touched down in San Francisco at 3am on Monday 4th.

We spent the next week in San Francisco, Menlo Park and Palo Alto familiarizing ourselves with the SF BART and Cal Train making trips all over the Bay Area. We were lucky enough to meet half a dozen top tier venture capitalists, and learnt enormous amounts about our pitching and potential difficulties with implementing QuantConnect. Thankfully on the first day we made a trip to the Kiwi Landing Pad – a service for New Zealanders to get orientated in the Valley. Of course as part of the full kiwi service there was afternoon beer and chips with the Australians. We felt at home already.

We spent a lot of the downtime in University Cafe in Palo Alto meeting amazing people completely by chance. On Wednesday there was an investor wearing a Stock-Twits shirt with two people pitching to him. When they were done, I rush over and grabbed his arm and gave him a 30 second pitch. It went well and after we had finished, someone sitting to the left had overheard the whole conversation – it happened to be the head of the New Zealand Venture Fund! It was great to bump into such an extensive network of fellow New Zealanders in the Valley.

The Bay Area was beautiful, modern and filled with incredible people but sadly, after a long week with good friends we set off to New York. Danielle had lived in New York for five years before coming to Chile so has an extensive network there and we were lucky enough to meet people from the Wall St Journal, traders in banks, a quant from Goldman Sachs and a professor of finance. A lot of these meetings happened after market hours, with wine or beer, and many were amazing New Zealanders through introductions from the Kiwi Landing Pad.

Overall it was great validation and feedback from the traders and quants who resoundingly wanted to see the system come to success, and gave us extra motivation to succeed. One of the strongest requests was from professional day-traders who are getting edged out of the market by algorithms. After a long, long two weeks running around 14 hours per day we finally crashed and got some Korean in Korea Town, NYC.

We’re getting back to the grind now, and aim to get the weekly releases back on track. Next update Friday 29th!

Will you pay $101 a share for Facebook?

The Wall Street Journal published an online interactive asking readers to set their own price for Facebook stock. Regardless of what happens during Facebook’s IPO tomorrow, or how badly it crashes after, I’m curious to see how accurate the crowd’s predictions will be.

I don’t know the sample size for these data, but since the May 3 prediction of $60, the crowd’s estimate has swung as high at $191 on May 6^th and as low as $25 this morning.  The current price of $101 makes me wonder if Facebook’s price throughout the day Friday will bear any resemblance to these predictions.

My guess is that the crowd will predict the price relatively well, and could guess even closer if the WSJ price prediction updated more quickly and there were a larger sample size.

Public sentiment, one of the fuzzy influences on market prices, may be the most unpredictable aspects of investing.  Crowd-sourced estimates have great potential as market indicators, and some tech-driven financial start-ups are taking advantage of the online collective intelligence to create better, more innovative investment products. One company we like is Estimize, which takes the ideas behind this WSJ interactive graphic and applies them to markets, using crowd estimates for all kinds of company metrics.

And will this data give investors an edge? Time will tell, but we like to see other companies applying technology and innovation to the world of investment. QuantConnect is also incorporating the crowd and open data to offer the best atmosphere for developing innovative algorithm investment systems, which we expect will translate into exceptional investments.