‘The Man Who Solved the Market’ introduces readers to quant trading

Meshal Muhammad

In his book “The Man Who Solved the Market,” journalist Gregory Zuckerman follows the life of Jim Simons, the founder of Renaissance Technologies LLC. Although it was published in 2019, the book still has relevance today for students who aspire to have a career in finance and stand out to employers.

Simons was one of the early pioneers of quantitative trading with the use of algorithms and financial models. With his colleagues, he built a hedge fund that has had an average of 66% returns since its founding in 1892, greatly surpassing the returns of other prominent hedge fund founders such as Steve Cohen, Ray Dalio and Warren Buffet.

Simons’s interest in mathematics from a young age led him to studying further as a young adult, obtaining his bachelor’s degree from the Massachusetts Institute of Technology and doctorate from U.C. Berkeley. He taught math at Harvard and later headed the Institute Defense Analyses, where he helped crack Soviet spy codes and found  a new infatuation — the financial markets.

Fired for expressing opposition to the Cold War in 1968, Simons taught at Stony Brook University, where he recruited many young math geniuses and build a strong world-renowned math department. He left Stony Brook in 1982 and started his first hedge fund with the help of former IDA colleague Leonard Baum, whose help enabled him to make a great deal of money.

After a while, gaps in their algorithm appeared and caused considerable losses. Simons was forced to close the doors, only to open up a new hedge fund by the name of Renaissance Technologies —

Quantitative firms like Renaissance make money by using complex and simple finance models such as the Baum-Welch algorithm, which acutely predicts the next step or outcome without giving the causation to the outcome, and the Markov model, which assumes that future outcomes are not dependent on past performance, it helps with recognizing patterns with the use of probability and statistics.

Quantitative firms also harness computers and their ability to store and process large amounts of data to predict outcomes. This has been especially helpful in times of financial crisis. Today, many industries from sports to healthcare use such algorithms to predict and determine future outcomes.

Hedge funds like Renaissance have been at the forefront of the quantitative revolution. Physics, math, statistics and computer science majors are becoming highly attractive and sought after by hedge funds and investment managers due to their ability to deal with large data sets, highlight patterns and create algorithms.

“The Man Who Solved the Market” is a good read, opening readers’ eyes to the different facets of the finance industry. It will prompt business students to seek knowledge outside the classroom walls and learn a host of skills such as financial modeling, coding and analyzing data overall.

A degree in math or computer science might prove more successful than one in finance.

For anyone looking for a career in finance and particularly with the hopes of working for or starting their own hedge fund, this is the book to read. It is also a great introduction for those wanting to learn about quant trading, and the author uses very simple language to explain complex theories and models.

The book may be purchased through Amazon.com or Barnes and Noble.