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Nerds on Wall Street: Math, Machines and Wired Markets Hardcover – June 9, 2009

ISBN-13: 978-0471369462 ISBN-10: 0471369462 Edition: 1st

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Nerds on Wall Street: Math, Machines and Wired Markets + My Life as a Quant: Reflections on Physics and Finance + The Quants: How a New Breed of Math Whizzes Conquered Wall Street and Nearly Destroyed It
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Product Details

  • Hardcover: 353 pages
  • Publisher: Wiley; 1 edition (June 9, 2009)
  • Language: English
  • ISBN-10: 0471369462
  • ISBN-13: 978-0471369462
  • Product Dimensions: 9.1 x 6.3 x 1.6 inches
  • Shipping Weight: 1.4 pounds (View shipping rates and policies)
  • Average Customer Review: 4.4 out of 5 stars  See all reviews (22 customer reviews)
  • Amazon Best Sellers Rank: #873,109 in Books (See Top 100 in Books)

Editorial Reviews

Review

Praise for Nerds On Wall Street

"Leinweber leads his readers through a largely unexplored forest, turning over ordinary-looking rocks to reveal hidden colonies of peculiar creatures that feed on moldering mounds of numbers teeming with trailing zeroes. His book is absorbing, instructive, and very, very funny."
David Shaw, Founder, D. E. Shaw & Co.

"David Leinweber has been a pioneer in developing and applying advanced technologies in the capital markets. This book is a virtual tour de force survey of many of the key innovations over the past two decades, with key insights for the future. It is a highly engaging, insightful, and entertaining book for all investors who want to understand the increasingly important role of technology in the financial markets."
Blake Grossman, CEO, Barclays Global Investors

"Leinweber isn't half as crazy as people said! He foresaw the profound change that wired technology would bring to markets (robots trading millions of shares in six milliseconds). Now he nails the Stupid Financial Engineering Tricks that dumped the markets, and offers his patented, sound insights on how the nerds will help bring us back."
Jane Bryant Quinn, Financial columnist, Bloomberg.com and Newsweek

"Through the lenses of finance 'nerds,' Dave Leinweber recounts the quantitative and technological revolution in equity trading. The book is humorously written but it is serious and insightful. It makes an important contribution to our understanding of financial innovation and the evolution of the capital markets."
Andre F. Perold, George Gund Professor of Finance and Banking, Harvard Business School

"Finally, a book that rightly honors the pocket-protected, RPN-loving, object-oriented, C-compatible, self-similar Wall Street quant! This is a delightfully entertaining romp across the trading floors and through the research departments of major financial institutions, told by one of the early architects of automated trading and a self-made nerd."
Andrew W. Lo, Professor of Finance, MIT Sloan School of Management

"David Leinweber is one of the great financial innovators of our time. David possesses a unique combination of expertise in the fields of money management, artificial intelligence, and computer science."
Blair Hull, Founder, Hull Trading & Matlock Trading

"An important, accessible, and humorous guide to today's electronic markets. Like Capital Ideas mixed with Being Digital, as told by Steve Martin."
Frank Fabozzi, Yale School of Management, Editor, Journal of Portfolio Management

"Slicing and dicing data to predict the future can get dicey. The Super Bowl market indicator holds that stocks will do well after a team from the old National Football League wins the Super Bowl. . . The "Sell in May and go away" rule advises investors to get out of the market after April and get back in after October. . . hundreds -- of Web sites hawk "proprietary trading tools" and analytical "models" . . . There is no end to such rules. But there isn't much sense to most of them either. An entertaining new book, "Nerds on Wall Street," by the veteran quantitative money manager David Leinweber, dissects the shoddy thinking that underlies most of these techniques."
Jason Zweig, The Wall Street Journal

"One of the best reads that I have picked up in some time. It stimulated me about things in the market that I didn't know.... A wonderful book"
Vince Rowe Radium, Biz Radio

"Where technology will take investing and trading in the future is anyone's guess. Yet, David J. Leinweber in his newly published book, "Nerds on Wall Street: Math, Machines and Wired Markets," provides a glimpse of the direction. In his lively — alternately raucous and reverent, deriding and respectful — Mr. Leinweber recounts the history of how technology has transformed investing and trading through the people that developed ideas and pioneered applications, most famously in indexing, optimization and quantitative investing. . . The book makes one of the best reads of the summer — suitable for the beach as well as for a serious reader in suit and tie at the office."
—Pensions & Investments

“Explains complex financial instruments in relatively simple terms, and the same goes for complex trading techniques. . . 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.
— Seeking Alpha

Review

Additional Praise for Nerds on Wall Street

"Most new technologies are exploited first by "alpha geeks," the folks with the skills to push the envelope. This is as true on Wall Street as it was on the web. David Leinweber was one of those alpha geeks, but is also the first to chronicle the innovation process from early adopter to mainstream acceptance."
Tim O'Reilly, Founder & CEO O'Reilly Media

"Nerds on Wall Street is a thoughtful, funny, and comprehensive history of the overlooked role geeks have played in our financial markets from the earliest days of telegraph, to risk management systems in the current credit crisis. The book is an irreverent "I Was There" chronicle of how our financial markets were formed from silicon, savvy and software. Highly recommended."
Paul Kedrosky, Infectious Greed, Ten Asset Management and Kauffman Foundation

"For decades Dave has not only understood more investment technology than anyone, but with patience and a great sense of humor, he has made the effort to explain it to his less tech savvy friends. Nerds on Wall Street is a home run for us all."
Richard Rosenblatt, CEO, Rosenblatt Securities

"Nerds on Wall Street is a wild, funny ride though the technological changes that underpin modern financial markets. You will find yourself laughing out loud at what could otherwise be a dry subject. And, if you’re not careful, you might even learn something!"
Richard R. Lindsey, Chairman, International Association of Financial Engineers; Principal, Callcott Group LLC

"If you're interested in what computers are doing with your money, then this book is for you."
Richard Peterson, MD, Managing Director MarketPsy Capital LLC; Author, Inside the Investor's Brain

"In David’s words, the stock market is a "victim not a cause" of the great mess of 2008. It’s refreshing to read a book with such insight during these difficult times. I applaud David Leinweber for this timely masterpiece."
Bill Aronin, Co-founder Quantitative Analytics, Inc; Sr. Manager, Thomson Reuters

"Clear, light language and wry humor mask David Leinweber’s exhaustive compendium of technological innovations for and impacts on asset trading. Leinweber brings an entrepreneur’s experience and an academic’s perspective to financial technology; and has produced the definitive work, as up-to-date as it is encyclopedic."
David K. Whitcomb, Founder and Chairman Emeritus, Automated Trading Desk and Professor of Finance Emeritus, Rutgers University

"Dr. Leinweber continues to be a patron saint of any nerd who stumbles onto Wall Street. Many of his most insightful ideas are here in this book, the utility of which are only matched by the humor of their presentation. As the markets have changed in 2008, the need to collect, process, and understand novel information sources has never been greater."
Jacob Sisk, Infoshock, Yahoo

"Thoughtful insights covering trading, investment practice and system design encased in humor by an expert in all four: a good and practical read."
Evan Schulman, Founder, Tykhe, LLC.

"David is one of the top practitioners in the fields of textual analysis and sentiment and its application to trading. Leveraging "smart" machines to parse and extract signal from massive quantities of textual data is hard, and David’s work has put him at the vanguard of the next wave of alpha generation."
Roger Ehrenberg, Information Arbitrage, and IA Capital Partners


More About the Author

Dr. Leinweber is Haas Fellow in Finance and founding director of the Center for Innovative Financial Technology at the Haas School of Business, University of California, Berkeley. His professional interests focus on how modern information technologies are best applied in trading and investing, and how technology affects global financial markets.

As the founder and advisor to financial technology companies, and as a quantitative investment manager, he is an active participant in today's transformation of markets. Clients at his consulting and software business include some of the world's largest investment managers, hedge funds, brokers and exchanges. All build on a history of innovation in financial technology.

At the RAND Corporation, he directed research on real-time applications of artificial intelligence that led to the founding of Integrated Analytics Corporation. IAC was acquired by the Investment Technology Group, (NYSE:ITG) and, with the addition of electronic order execution, its product became QuantEx, an electronic execution system still in use for millions of institutional equity transactions daily. Large institutions concerned with controlling transactions costs and proprietary traders found them particularly valuable.

As Managing Director at First Quadrant, he was responsible for institutional quantitative global equity portfolios totaling $6 billion. More than twenty long and market neutral strategies utilized a wide range of computerized techniques for stock selection and efficient trading. He won five rounds against the Wall Street Journal's investment dartboard.

Quantitative investing is driven by electronic information, and the Internet dramatically transformed the financial information landscape. This led to the founding of Codexa Corporation, a Net based information collection, aggregation and filtering service for institutional investors and traders. The company's clients included many of the world's largest brokerage and investment firms.

As the founding director of the Center for Innovative Financial Technology at U.C. Berkeley, and previously as a visiting faculty member at Caltech, Leinweber worked on practical applications of ideas at the juncture of technology and finance. He has advanced the state of the art in the application of information technology in both the sell-side world of trading and the buy-side world of quantitative investment. He's published and spoken widely in both fields.

In his misspent youth, he graduated from MIT, in physics and computer science, where he was one of the first 5000 people on the Internet. That was when it was called the ARPAnet and wasn't cool. He also has a Ph.D. in Applied Mathematics from Harvard. But on a good day, it's hard to tell.

Customer Reviews

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This was a very informative and fun book to read.
David Porter
It could easily be the best history book we have of how technology came to play a larger role in markets.
Will Alexander
Very light, humorous approach that makes the technical-to-most-of-us material interesting and readable.
John Beck

Most Helpful Customer Reviews

163 of 191 people found the following review helpful By Aaron C. Brown TOP 1000 REVIEWERVINE VOICE on July 7, 2009
Format: Hardcover
With all due respect to the previous Amazon reviewers, it's hard to believe they both (a) read this book and (b) have any familiarity with Wall Street technology. The book is a collection of articles written for technology magazines from the mid-80s to the mid-90s. Even within an article entire paragraphs are repeated, and the same idea in more or less the same words can often be found a dozen times or more in the book. This is interspersed with apparently random cut-and-pastes from the Internet and lots of tiny black-and-white pictures which the author tells you are only meaningful with color and animation. You get the feeling the author cleaned out his desk, and decided to make some money from the stuff he didn't want anymore.

There is some useful information in here, and the author does know a lot about automated equity trading before the advances of the late 90s. The trouble is it's not presented in coherent sequence and the technical level is too uneven. For example, it is asserted five separate times that garbage collection is a problem for LISP, without any background material. Anyone who knows what garbage collection means in this context, or has worked with LISP, already knows this and will get annoyed at even the second repetition. Anyone without that background will find the repeated explanations meaningless. There is nowhere near enough technical information for nerds who want to understand Wall Street (or the Wall Street of 20 years ago) or Wall Streeters who want to understand nerds, but there is far too much unexplained jargon for non-technical readers.

Another complaint is the author makes significant errors when he steps beyond his expertise, which is often.
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8 of 8 people found the following review helpful By Lars Tackmann on June 10, 2010
Format: Kindle Edition Verified Purchase
This book is a fun read, but ultimately somewhat disappointing. I had hoped for a book discussing the various computer related treading strategies used on wall street, but instead I found a widely scattered and outdated treatment of everything from internet market manipulation to green technology. Parts of the book are very good, including its treatment of data mining strategies and the problems with LISP garbage collection, but elsewhere it completely looses the focus. What annoys me the most (and almost compelled me to give it one star) is the extremely bad flow of the text. Readers should be aware that this book is just a collection of prior articles and often these are not elaborated and expanded upon (or even put in context) thus mostly raising more questions than they answer.

However when all is said and done, the book is quite funny and the author does point to many other interesting books and articles, so I will give 3 stars and hope that he will write a better nerd quant book next time.
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25 of 33 people found the following review helpful By S. McGee TOP 500 REVIEWERVINE VOICE on May 30, 2009
Format: Hardcover
Wall Street, if you believe Ben Bernanke's testimony to Congress last year, is an "abstraction" to most of us. And if there's one part of Wall Street that is abstract even to large parts of Wall Street itself, it's the world of the quant -- quantitative finance, the guys who develop electronic-based investment, trading and analytical models and systems.

Dave Leinweber has been part of that world for decades, and for years he's been showing up at conferences talking about the world of Wall Street's nerds. Finally, he's put his knowledge and smarts to work to explain it to even the most math-phobic person who wants to understand just what the collision between financial markets and technology means for investors, from the most sophisticated hedge fund trader right down to those of us trying to figure out what to do next with our 401(k). Markets move faster than ever before -- you can now execute a trade in less time than it takes you to start reaching for the telephone (six milliseconds or thereabouts). They also move in ways that the architects of these systems -- increasingly significant players -- don't readily understand themselves.

Most of the people on Wall Street who know and understand these changes and what they mean either don't have the communication skills to make the rest of us understand; others are too busy making money or choosing to keep a low profile to share their wisdom. Those who do end up writing about quants all too often end up in one of two camps: over-simplifying what they do and telling the world how brilliant they are, or over-simplifying what it is that they're up and deciding that they are Dr. Strangelove-style villains. Leinweber's analysis is simple, straightforward and lucid.
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4 of 4 people found the following review helpful By Scott C. Locklin VINE VOICE on June 3, 2010
Format: Hardcover
This book is an amusing overview of the history of electronic trading, the hedge fund business, and some personal anecdotes of the author's experiences as a Nerd on Wall Street. The best way to describe it: if you took the quant chapters of Derman's "My Life as a Quant" and merged it with a schoolhouse rock video of the history of finance as narrated by Groucho Marx. The gags in it are laugh out loud stuff; from the graphical sight gags to the verbal yarks; the author has a gift for turning what most consider a very dry subject into something amusing to read and pretty damn funny. He gets the important cast of characters right; any of these historical things should mention Tartaglia, Shaw, Barr Rosenberg and so on. I suppose Ed Thorp and maybe the Getco guys might have been mentioned, but really, the characters who ended influencing others were well represented in his history: Thorp ran a fairly small shop with no spin offs, and I don't think Getco has had any spin offs yet. I think his descriptions of electronic market making, CAPM, and how hedge funds make money are probably the best you're going to find on those subjects in plain english. The book does concentrate on "buy side" equity strategies; considering the author's work history, it's because this is what he did for a living. That means if you want the more technical side of what he's writing about; Grinold and Kahn or Elton and Gruber are your go-to books. The chapter on market manipulations was also good. I mostly wished he had referenced some more technical studies on the subject -it's something most nerds don't like to think about, and it got my "semi pro" nerd wheels spinning a little bit.Read more ›
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