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The Riksbank held its benchmark rate at 2% in a decision announced on Wednesday, the lowest level in more than two years, matching the estimates of all 18 economists surveyed by Bloomberg.
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Yahoo
3 minutes ago
- Yahoo
AQR's ‘Hard to Believe' Study Spurs Clash Over AI Use for Quants
(Bloomberg) -- Wall Street quants and leading financial academics are clashing over whether artificial intelligence has upended one of the core principles of systematic investing. Quant traders, who use rules-based strategies derived from data analysis, have long believed their models get less effective when they become too complicated. That's because they suck in too much of the distortive noise that makes predicting markets such a challenge in the first place. Why New York City Has a Fleet of New EVs From a Dead Carmaker Chicago Schools Seeks $1 Billion of Short-Term Debt as Cash Gone Trump Takes Second Swing at Cutting Housing Assistance for Immigrants A Photographer's Pipe Dream: Capturing New York's Vast Water System A London Apartment Tower With Echoes of Victorian Rail and Ancient Rome But a researcher at AQR Capital Management has sparked a backlash with a study claiming the opposite — that rather than being a liability, bigger and more complex models might offer advantages in finance. The paper, titled , showed that a US stock market trading strategy trained on more than 10,000 parameters and just a year of data beat a simple buy-and-hold benchmark. 'This idea of preferring small, parsimonious models is a learned bias,' said Bryan Kelly, head of machine learning at AQR and one of the paper's three authors. 'All of us are on a day-to-day basis using these large language models that were revolutionary in their success because of this push toward extraordinarily large parameterizations.' The research has triggered a heated debate since it was published in the prestigious last year, among both peers in the quant industry and those in related academic circles. At least six papers, including from scholars at Oxford University and Stanford University, have now challenged its findings. Some argue the study has a questionable design that renders it irrelevant for live trading. Others say it's less cutting-edge than it appears anyway. (Kelly has subsequently written a defense.) Among the most notable critics is Stefan Nagel, a finance professor at the University of Chicago — the very school where two of AQR's founders met and where the firm's original investment philosophy took shape. His first reaction? 'I found the empirical results hard to believe,' he said. After digging into the details of the study, Nagel concluded that because the model was dissecting just 12 months of data, it was simply copying signals that had worked more recently. In other words, it was following a momentum strategy — a well-established trading approach. 'It's not because the approach learned from the data that this effect is there,' Nagel said. 'It's because they did something mechanical implicitly, and this mechanical thing happened to work well by luck.' Jonathan Berk, a Stanford economist who was among the first and fiercest critics of the paper, called it 'virtually useless' for aiming at predictions that tell you nothing about what drives asset returns. Daniel Buncic at the Stockholm Business School said the study makes some obviously wrong design choices to reach its conclusions. Co-written with Semyon Malamud at EPFL in Switzerland and Kangying Zhou at Yale University, the paper has provoked this response because it challenges a long-held assumption about forecasting financial markets. While modern AI can perform remarkable tasks like telling cats from dogs in an image, that's because it can learn from a massive supply of photos, and because animals have defined and unchanging features. In contrast, stocks provide an inherently limited amount of data (especially for slower-moving strategies that may only trade once a month), and each can be swayed by countless different forces. The fear has always been overfitting — that complex models will learn from all the noise in historical data, much of which may not apply in future trading. So quants have traditionally relied on relatively simple insights, like the famous Fama-French three-factor model (which analyzes returns based on each company's size, valuation and relationship with the broader market). AQR itself was built on such so-called factors, which aim to outperform over long stretches of time. It is only in recent years that the $146 billion money manager has raised capital for machine-learning strategies and said not all trading signals have to be backed by economic theory. Kelly's main contention is that traditional quant models are so simple they under-fit, producing inferior forecasts, while sufficiently complex models actually learn not to overfit too much. To be sure, the critics don't argue that machine learning has nothing to offer finance. They mainly view the paper's results as too good to be true. 'The methods have a role and can be used,' said John Campbell, an economics professor at Harvard University who co-founded Arrowstreet Capital, a quant firm. 'But some of the most eye-catching results have successfully been called into question.' Even Ben Recht at the University of California, Berkeley — a renowned computer scientist who back in 2007 developed the method used in the paper — weighed in in his blog, saying 'the hype cycle gets everyone confused.' The method in the paper was far from cutting-edge AI, he said, and anyhow didn't seem necessary for the task at hand. To Kelly, who teaches at Yale alongside his AQR gig, criticisms of the paper are 'a little bit hollow' for focusing on the narrow aspects of what was ultimately proof of concept research. 'The practitioner world understands that these conceptual methods, when implemented in a more sophisticated manner, are going to be beneficial,' he said. 'The exact ideal combination of how much of frontier machine learning methods to use versus more traditional economically oriented methods — that's still something we're trying to understand.' Foreigners Are Buying US Homes Again While Americans Get Sidelined What Declining Cardboard Box Sales Tell Us About the US Economy Women's Earnings Never Really Recover After They Have Children Americans Are Getting Priced Out of Homeownership at Record Rates Survived Bankruptcy. Next Up: Cultural Relevance? ©2025 Bloomberg L.P. Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
Yahoo
3 minutes ago
- Yahoo
Italian fashion house Valentino hires Riccardo Bellini as CEO
MILAN (Reuters) -Italian fashion house Valentino has appointed Riccardo Bellini as new chief executive, it said on Wednesday. Bellini, who has been working as managing director of leading Valentino investor Mayhoola, replaces Jacopo Venturi whose departure was announced last week. (Writing by Keith Weir, editing by Gavin Jones)
Yahoo
3 minutes ago
- Yahoo
Jaguar exec on the controversial 'Copy Nothing' rebrand, its EV future, and Trump
For a brand that's seemed off the radar in recent times, its been an interesting past year for Jaguar's Tata Motors ( There was the rebrand late last year that critics labeled "woke" and a startingly unexpected concept — the Type OO — that car fans found polarizing at the very least. Even President Trump weighed in on Jaguar following the resignation of its CEO last month, calling the rebrand a "total disaster." Jaguar managing director Rawdon Glover has a lot on his plate, but he is optimistic that the 90-year-old British marque is on the right path. He spoke to Yahoo Finance at the Quail event during Monterey Car Week about that rebrand, why Type OO's design is an evolution, and why competing in the "brutal" premium luxury space needs a rethink. The following interview has been condensed for clarity and length. Talking about the Type 00 concept, what does it mean for the brand in particular? The new tagline is "Copy nothing," right? Is that what we're talking about? "Copy nothing" probably needs a little bit of unpacking. So the founder of Jaguar, Sir William Lyons, he used this term, and he said, "When Jaguar is at its very best, it is a copy of nothing." And what he means by that is, it shouldn't look like anything else on the road. When everybody else goes in one direction, Jaguar should have the confidence and the strength and its own convictions to do something completely different. So what we're showing with Type 00 is a very clear signpost as to what you can expect for the future. You've made some interesting design points about the vehicle. Being an EV, for example, means it could have had a small front because there's no motor, but you didn't do that. Why? Because we don't think that's what people want in a $130,000 vehicle. What recent history and EVs has shown us is, very quickly, EVs have become commoditized. They tend to be cab-forward with small wheels. They tend to ride higher. What it means is the sector becomes actually quite homogenous and very commoditized. If we're going to go into that segment and say, "You're going to buy a $130,000 Jaguar," you've got want one. When you get inside the car, it's going to feel incredible. And when you drive it, because it's a Jaguar, it's got to be an involving, engaging car to drive. If Sir William Lyons were alive today, I'd like to think that's exactly the type of car that he would be designing and engineering. When the "Copy Nothing" campaign launched back in November, some car enthusiasts complained about the video ahead of the concept's release, calling it "woke." Were you surprised by some of the backlash? Yeah, I think what's important to say is the tease campaign, which is probably what you're referring to, was never intended to be either a cultural or political statement, full stop. It was about creativity and individuality. You know, [critics] harness that for probably other purposes, but that's never the intention. But if you then step back from that and say, "Okay, well, what has it done?" It's given us a platform. [The video's] job, in between unveiling the brand and unveiling Type 00 in Miami, was to get as many eyeballs as possible on the Miami launch. That was its only job. President Trump also weighed in on the rebrand recently after Jaguar's CEO stepped down a couple of weeks back. Were you surprised by that? We literally just put it on our platform to say something really interesting is happening. So I am a bit surprised that we're still talking about it. But you know, and I just reiterate, it was not about cultural statement. It was not a political statement. It's about creativity and individuality. Speaking of other somewhat controversial matters, Jaguar's all-electric pivot. That's part of the future the brand — has that changed? It's a kind of all hockey analogy — you've got to skate to where we think the puck is going, not where the puck is today. I think there are other elements of it too. I think we have to make sure the technology is game-changing. So 700 kilometers, 400 miles of range. That will remove a lot of the very rational barriers, plus super-quick charging. But you know also, what we're finding is, at those price points [around $130,000], it's unlikely [to be a Jaguar buyer's] only current asset. So the type of people that are here [at] the Quail, the type of people that buy that car will have three, four, five [cars], and it's about what car is best for that particular journey they're doing at the time. So we come back to the earlier point, which is, what do we need to do? We need to make the most desirable car that we can. And how can we do that? Well, by having incredible proportions and looking like nothing else. What do you say to people who say a radical design coupled with going all-electric alienates your core clientele? We're the custodians of the brand, right? And a lot of people, they feel a huge amount of passion for Jaguar. I've certainly learned that in the last 12 months, and you'd much rather have that than actually have nobody care. But if you look at what's happening in terms of the technology landscape, what's happening with competition, what's happening in terms of the commercial performance of [our existing] vehicles, you come to the point: what is required? When the E-Type landed in 1961 in Geneva, it didn't look like anything that came before it, and didn't look like anything else on the road. The spiritual successor, the XJS, again, didn't look like the E-Type. It looked like nothing else on the road. And I think at our high points in the Jaguar history, that's what we've done. You mentioned before that you're currently operating in the premium luxury space, that's super competitive. Is this one way to stand out? Yeah. If I look at what's happened in the last 20 years, really difficult. We call it the premium, but it's a brutally competitive space, dominated by players that are much bigger than us, at much greater purchasing economies of scale, and much greater manufacturing economies of scale. In any strategy, you start with, where do we want to play, and where do we think we can win? And if I look at, for example, our Range Rover business model, which, again, is not dissimilar from this, if you have a really compelling product proposition and desirable brand, we can operate really successfully at those elevated price points. Pras Subramanian is the lead auto reporter for Yahoo Finance. You can follow him on X and on Instagram. 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