Nerds on Wall Street: Math, Machines and Wired Markets |  | Author: David J. Leinweber
Publisher: Wiley
List Price: $39.95
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Rating:  15 reviews
Sales Rank: 131711
Media: Hardcover
Edition: 1
Pages: 353
Number Of Items: 1
Shipping Weight (lbs): 1.4
Dimensions (in): 9.1 x 6.3 x 1.3
ISBN: 0471369462
Dewey Decimal Number: 332.64273
EAN: 9780471369462
ASIN: 0471369462
Publication Date: June 9, 2009
Availability: Usually ships in 1-2 business days
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Product Description
An intriguing look at how technology is changing financial markets, from an innovator on the frontlines of this revolution
Nerds on Wall Street tells the tale of the ongoing technological transformation of the world's financial markets. The impact of technology on investing is profound, and author David Leinweber provides readers with an overview of where we were just a few short years ago, and where we are going. Being a successful investor today and tomorrow--individual or institutional--involves more than stock picking, asset allocation, or market timing: it involves technology. And Leinweber helps readers go beyond the numbers to see exactly how this technology has become more responsible for managing modern markets. In essence, the financial game has changed and will continue to change due entirely to technology. The new "players," human or otherwise, offer investors opportunities and dangers. With this intriguing and entertaining book, Leinweber shows where technology on Wall Street has been, what it has meant, and how it will impact the markets of tomorrow.
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Showing reviews 1-5 of 15
 A fun and informative read. Couldn't put it down. February 4, 2010
Dr. Phil Maymin
I got this book at a finance conference yesterday and read it all the way on the plane home. Bear in mind I almost always sleep on the plane from lift off to touchdown, but I couldn't put this one down.
The history sections are simply superb and the well-chosen pictures tell excellent stories. And it is representative of the book in that it gives perspective.
In short, that's what this book offers: a step-back overview of technological progress on Wall Street. The specific chapters also do a great job reviewing particularly important recent and not-so-recent innovations, from textual analysis to genetic algorithms.
And of course, it is quite fun to read.
 Book Review from the Aleph Blog January 23, 2010
David Merkel (Ellicott City, MD United States)
After my last book review, a reader asked how I was able to read so many books, given my other responsibilities. My answer is this: I keep a book near me at all times. When I get a break, I read a few pages. Over a week, that means a book gets read. That's how I read so many books.
Onto tonight's book: I had a number of friends that liked Nerds on Wall Street, and I liked it as well. The book has a number of strengths. The author explains complex financial instruments in relatively simple terms. The same for complex trading techniques.
The author gives history and background as one that was sucked into computerized finance from a technical background that might have had him in a purer technological role. As I read what he went through, I said to myself, "He was seven years ahead of me." I had my own share of innovative things that I did, but the things done in his era were bigger.
He gives reasonable explanations of how computerized trading works, and what factors they look for in designing trading systems. He talks about the common factors that dominate trading systems, and a few that he knows of but has not published. (He gives a taste, but does not serve up the full dish.)
Like me, he serves up a full plate of data mining disasters. There are a lot of losses to be taken by those who think they have discovered a statistical regularity in the financial markets. The few significant regularities make sense to seasoned observers, and are not consistent. They pay off 70% of the time, and kill you 15% of the time.
On Wall Street, if you are really, really smart, they will hand over to you exceptionally advanced tools that you can use to destroy yourself in a unique and memorable way. So it was for LTCM.
Quibbles
The book is badly edited. Many elements appear multiple times with little modification. It sometimes reads like a bunch of articles that was strung together into a book. The editors should have tried to create something more cohesive.
The last several chapters feel like an afterthought, though many of the ideas presented there are ideas that I have suggested. I have talked about splitting mortgages into smaller mortgages plus equity appreciation rights. I have also suggested creating mutual banks, rather than what was done with the TARP.
All that said, the average reader will learn a lot here. I recommend the book to those that want to dig into how the equity markets became more computerized. For those that want to understand the same for the debt markets, that book remains to be written.
 An interesting overview November 26, 2009
Dr. Lee D. Carlson (Baltimore, Maryland USA)
1 out of 2 found this review helpful
There are many creative and dynamic individuals that work on Wall Street that use sophisticated mathematics and artificial intelligence for financial trading and who do not satisfy the "nerd" classification. But despite the title of this book, the author gives a very interesting overview of the use of mathematics and machine intelligence in financial engineering. His approach to history however is purely anecdotal, so readers should not expect a detailed study, but rather a work that targets the "general audience", however vague the latter characterization is. There is a lot in the book that is controversial, and many who work in the financial industry may be insulted by some of the author's commentary, but in general he refrains from the vituperation that characterizes much of the current discussion on financial modeling.
The author covers just about all the techniques used to "get an edge" in financial trading, and his coverage of computational linguistics is unusual in that is typically not discussed at all in books at this level of discourse. Readers will also get more insight into the concept of "alpha" and what it is like to work in the field of financial modeling. Indeed, modelers have been blamed for much of the current "financial crisis", but some have also taken credit for inducing events that they show no evidence for having caused or controlled. The origin of this kind of mental confabulation is not really known, but the author is aware of it when he states that in financial forecasting it is "remarkably easy to fool yourself."
It is along these same lines that the author falters in the book when he blames some of the more "exotic" financial instruments for the "financial crisis". He banters about words such as "pointless complexity" and "monstrously complex" to characterize some of these instruments but at no place really defines, even in a loose sense, of what complexity is. Also, he never gives any quantitative evidence that is was mortgage-related financial engineering that contributed primarily to the current financial situation. It would be very difficult to disentangle the effects of mortgage-backed securities from other derivative securities. This part of the book is therefore its worse, and needs considerable revision on the part of the author.
In addition, the author has too much faith in governmental regulation, as is apparent by his support of many of the regulatory institutions that have arisen in the last 80 years. He is not alone in his fear of a free market though. One need only view the actions of financial executives and their begging for alms from Washington. They tremble at the notion of a free market. They quake at the idea of no governmental agency to cushion them against their follies.
The current schism between "intuitive" and "quantitative" trading is also brought out quite elegantly in this book, and if the author's historical summarization is to believed, one can expect to see more use of quantitative methods in the future. The author's discussion in this regard is additional proof of the Schumpeterian nature of financial innovation in the twenty-first century. This creative destruction of past trading methods is to be encouraged, and hopefully the day will come soon when the Leo-Malamed-type trading is replaced by full automation, by technology robust enough, reliable enough, and intelligent enough to move capital where it should be moved, and to manage portfolios independently of the weak constraints of human intuition.
Informative, entertaining, timely read! October 17, 2009
C. Solomon (New York, NY)
1 out of 2 found this review helpful
As someone outside of the financial world, with no familiarity with the ways of Wall Street or the workings of financial markets, I found this book to be a great read. I actually learned something about the newer financial instruments that dominated the news last fall and the background of the "quants" phenomenon. Anyone who has not been under a rock for the last year should find this a compelling and entertaining read. Buy it!
Herds on Wall Street August 14, 2009
John Beck (Phoenix AZ)
3 out of 5 found this review helpful
Really good book. Very light, humorous approach that makes the technical-to-most-of-us material interesting and readable.
When I was done, I understood things about trading on Wall Street that I've never understood before.
And I also understood that innovation on Wall Street is just like innovation in every other market -- new things that are based on real needs and principles yield real, lasting value. But profiting from those "new insights" is limited by the time it takes the rest of the "herd" to follow. The problem comes, as we seen in the last section of the book, when the "herd" stampedes after innovation-for-innovation-sake instruments like derivatives and CDOs and we are faced with near market collapse.
All of this begs the question -- have the "real" innovations on the stock market been largely exploited already? Is there anything but "fad" left for the Nerds on Wall Street to offer the rest of the herd?
Showing reviews 1-5 of 15
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