《The Man Who Solved The Market》中文版翻译连载41
The MAn Who Solved The Market (44)
During the 1980s, Professor Benoit Mandelbrot — who had demonstrated that certain jAGGed mathematical shapes called frACtals mimic irregularities found in nature — argued that financial markets also have fractal patterns. This theory suggested that markets will delIVer more unexpected events than widely assumed, another rEAson to doubt the elaborate models produced by high-powered computers. Mandelbrot’s work would reinforce the views of trader-turned-author Nassim Nicholas Taleb and others that POPular math tools and risk models are incapable of sufficiently preparing investors for large and highly unpredictable deviations from historic patterns — deviations that occur more frequently than most models suggest.
二十世纪八十年代，本华·曼德博教授——曾证明某些被称为分形的锯齿形 形状模拟了自然界中的不规则现象——他认为金融市场也有 结构。该理论认为， 将产生比普遍假设的更多的意外事件，这也是人们怀疑由高性能计算机产生的复杂模型的另一个理由。曼德博的研究成果印证了曾为交易员的作家纳西姆·尼古拉斯·塔勒布等人的观点，即流行的数学工具和风险模型无法让投资者从历史模式中对大规模不可预测的偏离作出应对——这种偏离出现的频率远比模型显示的要高。
Partly due to these concerns, those tinkering with models and machines usually weren’t allowed to trade or invest. Instead, they were hired to help — and stay out of the way of — the traders and other important people within banks and investment firms. In the 1970s, a Berkeley economics professor named Barr Rosenberg developed Quantitative models to track the factors influencing stocks. Rather than make a fortune trADIng himself, Rosenberg sold computerized programs to help other investors forecast stock behavior.
Edward Thorp became the first modern mathematician to use quantitative strategies to invest sizable sums of money. Thorp was an academic who had worked with Claude Shannon, the father of information theory, and embraced the proportional betting system of John Kelly, the Texas scientist who had influenced Elwyn BerleKAmp. First, Thorp applied his talents to gambling, gaining prominence for his large winnings as well as his bestselling book, Beat the Dealer. The book outlined Thorp’s belief in systematic, rules-based gambling tactics, as well as his insight that players can take advantage of shifting odds within games of chance.
In 1964, Thorp turned his attention to Wall Street, the biggest casino of them all. After reading books on technical analysis — as well as Benjamin Graham and David Dodd’s landmark tome, Security Analysis, which laid the foundations for fundamental investing — Thorp was “surprised and encouraged by how little was known by so many,” he writes in his autobiography, A Man for All Markets.
Thorp zeroed in on stock warrants, which give the holder the ability to purchase shares at a certain price. He developed a formula for determining the “correct” price of a warrant, which gave him the ability to detect market mispricings instantly. Programming a Hewlett-Packard 9830 computer, Thorp used his mathematical formula to buy cheap warrants and bet against expensive ones, a tactic that protected his portfolio from jolts in the broader market.
During the 1970s, Thorp helped lead a hedge fund, Princeton/ Newport Partners, recording strong gains and attracting well-known investors — including actor Paul Newman, Hollywood producer Robert Evans, and screenwriter Charles Kaufman. Thorp’s firm based its trading on computer-generated algorithms and economic models, using so much electricity that their office in Southern California was always boiling hot.
Thorp’s trading formula was influenced by the doctoral thesis of French mathematician Louis Bachelier, who, in 1900, developed a theory for pricing options on the Paris stock exchange using equations similar to those later employed by Albert Einstein to describe the Brownian motion of pollen particles. Bachelier’s thesis, describing the irregular motion of stock prices, had been overlooked for decades, but Thorp and others understood its relevance to modern investing.
In 1974, Thorp landed on the front page of the Wall Street Journal in a story headline: “Computer Formulas Are One Man’s Secret to Success in Market.” A year later, his fortune swelling, he was driving a new red Porsche 911S. To Thorp, relying on computer models to trade warrants, options, convertible bonds, and other so-called derivative securities was the only reasonable investing approach.
“A model is a simplified veRSIon of reality, like a street map that shows you how to travel from one part of the city to another,” he writes. “If you got them right, (you) could then use the rules to predict what would happen in new situations.”
Skeptics sniffed — one told the Journal that “the real investment world is too complicated to be reduced to a model.” Yet, by the late 1980s, Thorp’s fund stood at nearly $300 million, dwarfing the $25 million Simons’s Medallion fund was managing at the time. But Princeton/Newport was ensnared in the trading scandal centered on junk-bond king Michael Milken in nearby Los Angeles, ending any hopes Thorp held of becoming an investment power.
Thorp never was accused of any impropriety, and the government eventually dropped all charges related to Princeton/Newport’s activities, but publicity related to the investigation crippled his fund, and it closed in late 1988, a denouement Thorp describes as”traumatic.” Over its nineteen-year existence, the hedge fund featured annual gains averaging more than 15 percent (after charging investors various fees), topping the market’s returns over that span.
Were it not for the government’s actions, “we’d be billionaires,” Thorp says.