Our guest this week was Dr. Andrew Butler, Chief Investment Officer here at ReSolve. He has an Honors B.Sc. in Applied Mathematics & Physics from Memorial University, an M.A. in Applied Mathematics & Statistics, Financial Engineering from York University, and a PhD from the University of Toronto, Department of Mechanical & Industrial Engineering. Our conversation covered:
- Mentors, studying optimization, machine learning and emulating similarities
- Comparing methodologies used in calculating oil reserves, with empirical finance
- Mathematics, known truths, soft axioms and assumptions
- Data science, tools and hypothesis tests in finance
- Comparing the definitions of “noise” and different scientific methods
- Regression types, relationships and features
- Existing models vs creating models with data
- Hyperparameters, universes, good decision-making and edges
- The fallacy of “The Efficient Frontier” in Modern Portfolio Theory
- Methods that make for good choices, and setting expectations
- Neural Networks, financial data extraction and optimization science
- Building complex models, integrating and optimizing predictions, and making decisions
- Counterintuitive predictions and “explainability” – integrated vs optimized models
- Optimizing for decision accuracy by minimizing prediction error
- Using Decision Trees, Ensembles and Boosting
- Market data and making predictions using de-coupled vs integrated approaches
- Training models and optimizing, going forward
- Optimal covariance shrinkage and minimizing error
- Constrained vs unconstrained mean variance portfolios, de-coupled vs integrated, in a managed futures context
- The effect of constraints in limiting models from being “different”
- The practical takeaways about integrated solutions for Advisors and Portfolio Managers
- The value of humility in optimizing for financial markets – knowledge, wisdom and experience
- Stochastic dominance vs t-tests
- Time horizons – size matters
- The Consultant Industry – monthly data vs understanding process
- And much more
This is “ReSolve’s Riffs” – live on YouTube every Friday afternoon to debate the most relevant investment topics of the day, hosted by Adam Butler, Mike Philbrick and Rodrigo Gordillo of ReSolve Global* and Richard Laterman of ReSolve Asset Management Inc.
*ReSolve Global Inc. refers to ReSolve Asset Management SEZC (Cayman) which is registered with the Commodity Futures Trading Commission as a commodity trading advisor and commodity pool operator. This registration is administered through the National Futures Association (“NFA”). Further, ReSolve Global Inc. is a registered person with the Cayman Islands Monetary Authority.
