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Inside the Black Box: The Simple Truth About Quantitative Trading (Wiley Finance) Hardcover – September 8, 2009

3.6 out of 5 stars 45 customer reviews

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Editorial Reviews


?Excellent new book . . . demystif[ies] the world of quant investing, and does so in a way that should be intelligible to any thoughtful investor. . . admirably thorough . . . and highly readable throughout. The book has a logical structure, which gradually builds an ever more complete picture of what it is that quants do, how they do it, and what the issues really are that surround quant trading. Much more than a simple "beginner's guide" to quants, and it really gets interesting in the final third, where [the author] looks in some detail at the risks inherent in quant approaches and the criticisms of quant trading?and how to evaluate them. To find out more about how to evaluate quants, read this book.?
?AR Magazine

In "Inside the Black Box," Rishi Narang makes the impossible seem possible: he takes the vastly misunderstood role of the quantitative trading strategy and makes it understandable to those with only the most tenuous working knowledge of global capital markets. How he does so is a sleight of hand no more complicated than patient, consistently eloquent writing, and easy-to-understand, basic examples."
?Markets Media Online

"The book, Inside the Black Box: The Simple Truth About Quantitative Trading, by Rishi Narang, is hands down the best introductory book I've read on the topic. Narang does a brilliant job of explaining (in simple English), how and why quantitative trading works. If you are looking for a primer on Quantitative Trading I strongly endorse and recommend this book."

"In a new book on quantitative trading strategies, entitled "Inside the Black Box: The Simple Truth About Quantitative Trading," Rishi Narang, founding principal of Telesis Capital, seeks to explain with real-world examples and anecdotes what it is exactly that quants do?The book focuses on a few major questions that Narang says are important to understanding the quant world. These include: what is a quant, what are the secrets of successful quant trading, what caused the disasters in quant trading, what role did quants play in the credit crisis, and what is the future of quant trading?"
?Advanced Trading

"You may be skeptical that Rishi Narang will be able to deliver on the ambitious promise of his book, Inside the Black Box: the Simple Truth about Quantitative Trading (published by John Wiley & Sons, 2009). But he does deliver. He tells you, in language that can be understood by most educated people, what a quantitative trading system is and what a quant does."

From the Inside Flap

Quantitative trading strategies—known to many as “black boxes”—have gained a reputation of being difficult to explain and even harder to understand. While there is a certain level of complexity to this approach, with the right guidance, you can successfully overcome potential obstacles and begin to excel in this arena.

That’s why expert fund manager Rishi Narang has created Inside the Black Box. In a straightforward, nontechnical style—supplemented by real-world examples and informative anecdotes—this reliable resource takes you on a detailed tour through the black box. It skillfully sheds light upon the work that “quants” do, lifting the veil of mystery around quantitative trading and allowing anyone interested in doing so to understand quants and their strategies.

Divided into three comprehensive parts, Insider the Black Box opens with an accessible introduction to the discipline of quantitative trading and quickly moves on to demonstrate that what many call a black box is in fact transparent, intuitively sensible, and readily understandable. Along the way, it also explains how quant strategies can fit into your portfolio and why they are so important.

Whether you’re an institutional investor or high-networth individual, the lessons learned here will help you gain an edge in today’s turbulent market. Some of the tough questions answered throughout these pages include:

  • How do quants capture alpha?
  • What is the difference between theory-driven systems and data-mining strategies?
  • How do quants model risk?
  • What can be learned about investing in general from quantitative trading?
  • And much more.

Given both the difficulty of the market environment over the past few years and the negativity surrounding hedge funds in general and quant funds in particular, there has never been a better time to become more familiar with what quantitative trading is really about. With the help of the framework found here, you can gain a firm understanding of quant strategies, discern which are more likely to succeed, and ascertain how to use specific strategies in a portfolio, to help improve the performance of your investment process.


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Product Details

  • Series: Wiley Finance (Book 501)
  • Hardcover: 240 pages
  • Publisher: Wiley; 1 edition (September 8, 2009)
  • Language: English
  • ISBN-10: 0470432063
  • ISBN-13: 978-0470432068
  • Product Dimensions: 6.4 x 0.9 x 9 inches
  • Shipping Weight: 15.2 ounces
  • Average Customer Review: 3.6 out of 5 stars  See all reviews (45 customer reviews)
  • Amazon Best Sellers Rank: #327,317 in Books (See Top 100 in Books)

Customer Reviews

Top Customer Reviews

By Aaron C. Brown TOP 1000 REVIEWERVINE VOICE on January 1, 2010
Format: Hardcover
This is an excellent book that fills an important need. It describes the nuts and bolts of quant trading without jargon or mystery. The most important point the book makes is there is no grand secret, no deep mystery. Quant traders make money using simple ideas anyone can understand, anyone can copy or come up with on their own; many of which are well-known and published. Too many books either muddy the waters that they may appear deep, or are so technical that people outside quant trading shops are unlikely to learn much from them.

The second major point, which the book makes indirectly throughout but only explicitly in the last chapter, is that simple does not mean easy. Successful quant trading requires extreme attention to details at every stage of the process. While it does not actually require great mathematical ability, people who do not think naturally in mathematical terms or who have not worked extensively in mathematical fields, are very rarely successful. Quants feel why some seemingly trivial things are vitally important, while other things can be safely ignored; without that feel you're flying blind.

The book does something important, it does it straightforwardly and well. Therefore there's not much to say about its good points. The rest of this review is criticisms, to correct the few major lapses. It's intended for people who have already read the book. If you haven't, and you have any interest in this field, buy it now and read the criticisms afterward.

I agree with Liberty4all that several reviews appear to be ballot-stuffing (this review seems to have been removed by Amazon, I don't think that's right, especially as it spawned a useful discussion with people weighing in from both sides).
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Format: Hardcover
Rishi sent me an email in response to my earlier review in which I had stated "This book is written by someone who has never traded himself but has only allocated money to outside fund managers. I would not recommend this book to a serious quant trader."

While I wrote what I believed was true, Rishi informed me that I had made a false claim. From the website of Tradeworx, I understand that Rishi has set up a quant hedge fund with Manoj Narang, who I guess is his brother.

Therefore, here are my edited comments which I hope are more consructive:

Rishi's book is a good managerial overview of quant trading and the quant hedge fund business. However, unlike the book, Quantitative Trading Strategies: Harnessing the Power of Quantitative Techniques to Create a Winning Trading Program by Lars Kestner, Rishi's book lacks empirical analysis of how to build, test and deploy mathematical trading strategies. If the empirical side of quantitative trading could be emphasized in this book over the managerial side, this would be an awesome book.
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Format: Hardcover Verified Purchase
This book is okay. It is a managerial overview of the quantitative trading field. Don't look for serious discussions of technical matters. There are some reviews on the flap which suggest this book can be useful to quants, but I think a seasoned quant will find more marketing material here than research material.
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Format: Hardcover
After reading the book, whether you find out or not what is inside the black box, you will surely find out that this black book is pretty empty. It is a very amateurish shallow attempt on a topic which is, by definition, so interdisciplinary and complex. The book consists of just pages and pages of wordy superficial narratives occasionally with some basic statistical concepts expressed in words thrown in often along with comparisons and analogies of stock market with situations which are at the minimum laughable and at the maximum stupid (from someone with only few years in this business and barely with an undergraduate in economics, you could expect it and I will forgive the author for that) . There is a difference in being experienced to write a book and being ambitious to write a book. I would have no problem if the book was titled as "What quants do for living" or "A narrative to the life of a quant" or "Some well known pains in the rear of a quant's butt" but a book titled "Inside the black box..." is expected to at least, tell us exactly that -- what is exactly inside the black box and -- I believe it is algorithms and mathematical/statistical concepts that sit inside the black box. Too bad, the author was totally in the dark when he went inside that black box and hence failed to enlighten us.

There also seems to be conflict of interest in promoting this book. While in the books Acknowledgement, the author acknowledges some people (Steve Drobny, Mathew Rothman) to be hugely helpful while writing this book, but then on the back of the book jacket the same guys provide the so called presumably unbiased "praises" for the book.
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I don't know whether all 5-star reviews are faked or not, but those 1-star reviews on this book seem very unfair. Almost all those bad reviews have the same complaint: the book is not talking about technical details or actual trading strategies. It is true that this book only gives the basic framework of a block-box trading system, but this is the first book I read that gives the framework so clearly. Also, the contents covered by this book is already given very clearly in the Table of Contents --- nobody is cheating. So, what is this book's fault? Why does this book deserves 1-star rating?

I am currently a Computer Science/Statistics PhD student. My research is generally on statistical data analysis, with a dozen published paper on this topic. To gain some basic ideas of systematic trading and see how my knowledge/skills can be applied, I've read a couple of books on automatic/systematic trading (all are popular and high-rating ones from Amazon). By far, this book is the one gives me most insights about how my knowledge in statistical data analysis can be applied to the field of black-box trading.

In a word, this book gives very nice picture of automatic/systematic/black-box trading. It is general, not covering any technical details / specific trading strategies. But it should be good for graduate students in Engineering/Science to gain a clear idea about systematic trading and how their knowledge can be, generally, applied to the field.
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