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Quant Bust 2020

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  • Zura Kakushadze

Abstract

We explain in a nontechnical fashion why dollar-neutral quant trading strategies (e.g. statistical arbitrage) suffered substantial losses (drawdowns) during the COVID-19 market sell-off. We discuss: (i) why such strategies work during “normal†times; (ii) the market regimes when they work best; and (iii) their limitations and why they “break†during extreme market events. An accompanying appendix (with a link to freely accessible source code) includes back-tests for various strategies, which put flesh on and illustrate the discussion in the main text.

Suggested Citation

  • Zura Kakushadze, 2020. "Quant Bust 2020," World Economics, World Economics, 1 Ivory Square, Plantation Wharf, London, United Kingdom, SW11 3UE, vol. 21(2), pages 183-218, April.
    • Handle: RePEc:wej:wldecn:792
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    File URL: https://www.worldeconomics.com/Journal/Papers/Article.details?ID=792
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