Nonlinear Investing

This book focuses on nonlinear investment strategies based on a quantamental approach, a combination of quantitative and fundamental analysis. It provides a systematic guide to applying quantamental approach, to enable them to more fully understand the dynamics of financial markets, manage their clients' money (e.g. pension, 401k, insurance assets) more efficiently, and achieve better portfolio performance.

When it comes to nonlinear information combination, there are potentially millions of ways to combine these factors. But which nonlinear way is appropriate to use? How can we determine that the nonlinear pattern we identified would persist in the future? Does that nonlinearity make investment sense? And how much is the value added over a linear model? These questions cannot be answered, either by simply exploring the data as you could torture the data to make it confess whatever you would like to hear (particularly big data which entails more freedom for data mining), or by pieces of fundamental information based on personal experience and preference as that can be very biased. Rather, nonlinear investing should be relying on both fundamental insights and quantitative analysis: it must first make fundamental sense to ensure that similar nonlinear patterns will occur in the future, and then should be validated by historical data so as quant marry fundamental: a quantamental approach!

In this book, the author uses an evidence-based approach to demonstrate how to conduct nonlinear investing through quantamental analysis. Nonlinear investing requires not only a deep understanding of fundamental markets but also a solid possession of quantitative analytical skills. The book will cover the following topics:

1. Why do we need nonlinear investing?

2. What is quantamental approach?

3. How to conduct a nonlinear investment via quantamental approach?

4. Practical real-world presentation of nonlinear investing in different asset classes

The primary audience are senior professional investors and quant/fundamental investment shops who look for new ideas to enhance their existing products or develop new products. The book will also be helpful to business and finance faculty and graduate students who are interested in frontier industry practices. The prerequisite is that readers should already have a good understanding of the asset and financial markets and quantitative analysis. If used as a textbook, it would be most suitable for upper-level graduate courses.