Anyone who has studied quantitative finance knows that it is a HARD science. I worked with a Nobel prize winner in economics, and the math dominated. There was no politics, no opinions, no ethics involved. It really is a science.
Most social media characterize finance as some ethical vice or organized political power structure - and those people simply don't understand finance.
Talking to people who are looking to just tear down modern finance are no different than climate change deniers, antivax, or flat earthers... and yes, they even exist in crypto (and on HN).
"Meaningful" is squishy. Is it strongly predictive, and in some cases, definitive? Yes.
Just because quantitative analysis has solid grounding doesn't mean that its use is unrelated to ethics. The finance establishment is an organized power structure whose decisions are political.
If you want an analogy, I'm pretty sure that you'll find plenty of people who used ballistics to achieve goals that you would find pretty unethical.
Except that there are humans involved. How do you boil arbitrary human action down to a HARD science?
However, the math approach to finance works because in its essence it is quantifying human reactions and or emotions, which in large crowds turns out to be more predictable. In the short run, still, software holds its edge with its probability approach but its not smart so that it is basically a rent seeker.
Physics is a science. Math is. Or Biology. Finance is not. Because it deals with the madness of crowds.
> Recipe for Disaster: The Formula That Killed Wall Street
> And Li's Gaussian copula formula will go down in history as instrumental in causing the unfathomable losses that brought the world financial system to its knees.
> Nassim Nicholas Taleb is particularly harsh when it comes to the copula. "People got very excited about the Gaussian copula because of its mathematical elegance, but the thing never worked," he says. "Co-association between securities is not measurable using correlation," because past history can never prepare you for that one day when everything goes south. "Anything that relies on correlation is charlatanism."
If you follow the scientific method, it's science. If you write an observational essay, it's not. You can build theories around falsifiable, replicable experiments pertaining to the madness of crowds. The error bars are longer. But they are not infinite.
It's not just social media and it is somewhat disingenuous to dismiss the idea that finance, specially specially international finance, does not have (some form of) power [that actually trumps and transcends political power].
This is a somewhat interesting film that I was watching the other day. It's mere existence addresses the first bit -- that perception is certainly not limited to "social media". And of course the film itself is about a super secret gathering of G8 ministers where they struggle with the decision to put in place some (undisclosed) policy change that they all know will have very drastic consequences for the global average joe.
The Confessions (2016): https://www.imdb.com/title/tt4647784
But when people say "finance is science" what they usually mean is "here is the complicated math that proves you can't lose money on this, we've modeled everything".
As the joke goes, 6 sigma events happen in finance every week.
100% agree. When I was an algorithmic derivatives trader, we joked that the math was there to scare up investors and scare off compliance. Little did we know...
put another way, its easy to earn 20% on a dollar. its hard to earn 20% on a billion dollars.
I feel like they are infinite? Because, for example, in hyperinflation, there's no upper bound on how long someone is going to keep printing money.
Any given instance will stop at a finite number, but you can't bank of that being the high water mark.
Refusing to take a side _is_ a side, it means you're fine with how things are going on their own.
This isn't corruption, it's just recognition that life has choices, and those choices have consequences, for yourself and others.
It's like the notion of a 100-year flood. Of course there could be a tsunami or a dam failure that completely inundates an entire city, but at some point you've got to accept a small risk and ensure you are covered for it.
This is like saying physics is not science because the nutjobs claiming we will recieve divine revelation by praying to "the quantum energy field" use physics-y terms in their BS.
No matter how hard you model you won’t be able to predict processes that are fundamentally unpredictable. And you would get fooled because you only observe finite amount of data.
It is surprising how complicated the math gets even if you try to model very simple processes (eg think of the n-body problem and how complexity increases with every addition of a body). It is not a given that complicated models mean you’re modelling a complicated process.
Your comment makes no sense. Just because there's modeling involved that does not make it a hard science. A hard science requires stuff like the ability to perform controlled experiments and replicability, in order to arrive at a high degree of accuracy in predictions.
Throwing around partial differential equations does not turn something into a hard science. You need to meet way more requirements before you're in a position to claim that.
OP's claim was that quantitative finance was *hard science*. Requirements regarding predictability are way more stringent than merely observing stuff and seeing how it responds to an input.
These are colloquial terms [1]. We might as well argue about whether Pop Tarts are ravioli or tacos sandwiches.
When informed the maths in economics is wrong, the economists don't go and fix their maths either.
Economics is more like sociology with some random incorrect formulas written on the black board as set dressing.
Economics might in self loathing claim they are the "dismal science", but the cold hard truth is they simply speaking are not doing their jobs properly. It's a broken research field.
Colloquial terms whose concrete meaning does not correspond to OP's claim.
There is no ambiguity in this: if your models are not testable and fail to predict behavior then it's not hard science.
The scientific mindset is there, but not the publishing because the publishing destroys the value of the model. Once your model is known, others trade against your model and it becomes invalid.
This comment is why the humanities should be a prerequisite for all academical endeavors...
It is worrying to see that people tend to just click thumbs down when they don't agree rather than to pick the towel and build a strong argument against what they don't agree with.
https://www.pionline.com/hedge-funds/renaissance-technologie...
You are not addressing the substance of my comment, namely that many investments are finite, and this is why infinite riskless investments don't work.
I agree that "infinite riskless investments don't work" and agree with the "possibility of consistent good rate of return." Many investments are indeed finite on a human scale. An investor will almost always want their money back with some return, no? At some point they'll take their money out of the investment or market and spend it. The particular issue was the claim that the Medallion Fund from Renaissance Technologies was a good example for a consistent rate of return. They may have done that but how would we know? Their data is self reported, and as far as I'm aware there's no publically available audits of their performance. Even if there were, we have evidence of their cheating at taxes through abuse of options. If I were you, I would take their claims with a very large lump of salt. Do you know who else claimed guaranteed double digit rates of return? Bernie Madoff. We might not have found out about his fraud either if it weren't for some whistleblowing and for his admission of wrongdoing.
The Medallion Fund may have returned 30-70% over decades. Do we really know for sure? I think you'd have been better off simply suggesting index funds for consistent returns for the average person or citing Warren Buffett or Bill Gross for generating alpha/consistent returns.