My guest today is Jean-Philippe Bouchaud, the Chairman of the multi-strategy quantitative hedge fund Capital Fund Management (5B+ AUM) and co-supervisor of the research team. He is a well known authority in the field of Econphysics, co-author of “Theory of Financial Risks and Derivative Pricing”, a Professor of École Polytechnique where he teaches Complex Systems and has his Ph.D in theoretical physics from École Normale Supérieure.
The topic is Trend Following.
In this episode of Trend Following Radio we discuss:
- Bouchaud’s physics background and how it collided with the world of classical economics
- The Black-Scholes model, and it’s still use; experimenting with simulation
- Bouchaud and his colleague’s paper, “Two Centuries of Trend Following“
- The efficient market hypothesis
- Why the existence of trends is one of the most statistically significant anomalies in financial markets
- How trends predate trend following
- Why classical economics has no framework through which to understand “wild markets”
- Benign randomness vs. wild randomness
- Accepting uncertainty
- Differences between physicists and economists
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