Protein folding via machine learning may spawn medical advances

Complex of bacteria-infecting viral proteins modeled in CASP 13

Introduction

In an advance that may presage a dramatic new era of pharmaceuticals and medicine, DeepMind (a subsidiary of Alphabet, Google’s parent company) recently applied their machine learning software to the challenging problem of protein folding, with remarkable success. In the wake of this success, DeepMind and other private companies are racing to further extend these capabilities and apply them to real-world biology and medicine.

The protein folding problem

Protein folding is the name for the physical process in which a protein chain, defined by a linear sequence of amino

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Frank Fabozzi blasts the state of academic economics and finance

An academic “ivory tower” (St. John’s College, Cambridge, UK)

In an interview published at the Enterprising Investor blog, Frank Fabozzi, a well-known researcher and author in the mathematical finance field, has sharply criticized the current state of academic economics and finance.

Here are some highlights:

The “rational models” constructed in economics and finance are increasingly disconnected from real-world behavior, as has been shown by research in behavioral finance. As Fabozzi and Sergio Focardi argued in 2012, “economics in its current form does not describe empirical reality but an idealized rational economic world.”

The problem with relying on “rational

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Technical analysis in major brokerages and financial media

Weather prediction, medical diagnosis and technical analysis

Suppose, in the weather forecast part of a local newscast, the person handling the weather displays a chart of recent temperatures in the local area, points out “trends” and “waves,” then mentions a “breakout pattern” from a recent temperature range. Most of us would not have much confidence in such a dubious and unorthodox forecast, and, if followed (e.g., for a major storm), could have serious consequences.

Or suppose, when one’s electrocardiogram is taken at a clinic, that the attending physician makes some measurements by hand between some events on the graph

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P-hacking and backtest overfitting

Credit: Wikimedia

The reproducibility crisis in science

Recent public reports have underscored a crisis of reproducibility in numerous fields of science. Here are just a few of recent cases that have attracted widespread publicity:

In 2012, Amgen researchers reported that they were able to reproduce fewer than 10 of 53 cancer studies. In 2013, in the wake of numerous recent instances of highly touted pharmaceutical products failing or disappointing when fielded, researchers in the field began promoting the All Trials movement, which would require participating firms and researchers to post the results of all trials, successful or not. In

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The seven reasons most econometric investments fail

Marcos Lopez de Prado, recently named 2019 Quant of the Year by the Journal of Portfolio Management, has released a presentation entitled The seven reasons most econometric investments fail.

Lopez de Prado’s overall point is that many widely used econometric approaches in finance either rely on misleading p-value statistics, or else rely on strong assumptions that are typically not satisfied by financial phenomena. Also, most econometric methods in finance do not pay sufficient attention to overfitting, either in the training set or in the testing set. These tools were, for the most part, developed in scientific fields such as

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Ray Dalio on why capitalism must be reformed

Credit: Ray Dalio

Dalio’s chronicle of capitalism’s ills

Ray Dalio, the founder of the highly successful hedge fund Bridgewater Associates, has written a detailed paper on why present-day capitalism, especially as it exists in the U.S., is in serious trouble and must be reformed, or else society risks increasingly serious social discord and economic dysfunction.

Dalio’s essay contains a treasure-trove of data, statistics and charts documenting the difficulties U.S. society in particular faces in the wake of increasing economic inequality, especially the manifold stresses faced by the less-well-off, and likely outcomes if nothing is done.

Here are some of

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What is the best training for finance PhDs?

A field day for machine learning and artificial intelligence PhDs

In a 27 March 2019 Bloomberg op-ed, Stony Brook University professor Noah Smith describes the quest by many technology and finance companies to hire top-tier PhD graduates, particularly in machine learning (ML) and artificial intelligence (AI). A 2017 Paysa study found that 35% of listed jobs in ML and AI required a PhD.

All of the major tech firms are aggressively expanding their staffs in the ML and AI arenas. Google has more than tripled its number of machine learning researchers in the past few years. Amazon is hiring

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Majority of highest-earning hedge fund managers and traders are at quant firms

Forbes’ list of highest-earning hedge fund managers and traders

Forbes has released their 2019 list of the twenty highest-earning hedge fund managers and traders (see also this Forbes analysis).

Here is a synopsis of the results:

Manager Rank 2017 earnings Company Type: Q* or D* Jim Simons 1 $1.6 B Renaissance Technologies Corp. Q Michael Platt 2 $1.2 B BlueCrest Capital Management D Ray Dalio 3 $870 M Bridgewater Associates Q Ken Griffin 4 $870 M Citadel LLC Q John Overdeck 5 $700 M Two Sigma Investments Q David Siegel 5 $700 M Two Sigma Investments Q Israel Englander

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Mutual fund report card: February 2019

Introduction

In a previous Mathematical Investor blog, we presented data on hedge fund performance, covering the 28-year period from 1990 through August 2018. We found that while the HFRI Fund Weighted Composite Index (HFRI FWI) has nearly identical long-term performance growth as the S&P 500 index, the past eight years or so have not been favorable to the hedge funds. Indeed, some of the leading hedge funds have suffered the largest losses.

Along this line, we noted that Warren Buffett recently won his ten-year bet with a hedge fund manager — an S&P 500 index fund bested a basket of

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Two news reports cite work by Marcos Lopez de Prado

In a previous blog, we mentioned that Marcos Lopez de Prado has been named “2019 Quant of the Year” by the Journal of Portfolio Management (see this previous blog for more details). Today (6 February 2019), Lopez de Prado was cited in two financial news reports.

In the first report, from the Financial Times, Lopez de Prado argues that the “black box” paradigm for artificial intelligence (AI), as is used by Amazon, Google, Netflix and others, is poorly suited to finance. Instead, he recommends the “causality” paradigm, which is used more by large scientific laboratories such as the Lawrence Berkeley

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