Nerds on Wall Street: Math, Machines and Wired Markets

by David J. Leinweber

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...

• Format: Hardcover
• Language: English
• ISBN: 0471369462
• ISBN13: 9780471369462
• Release Date: June 2009
• Publisher: Wiley
• Length: 400 Pages
• Weight: 1.40 lbs.
• Dimensions: 1.6" x 6.2" x 9.0"

Customer Reviews

Fine Personal History

I require my MBA students to read chapters of "Nerds on Wall Street" to gain background for my courses in IT and the financial markets. It is a personal and idiosyncratic history of Dr. Leinweber's experiences during the formative period of our electronic financial markets. It is not academic, but a richly textural view that has more of a firsthand "Liar's Poker" feel. While a number of the chapters are essentially reprints of previously published material, it does offer the reader a firsthand view of thinking at the time and has provided me examples of prior art in patent disputes. It resonates with my students and puts events in context. Having worked on Wall Street and in technology since 1968, our careers are contemporaneous and I can personally relate to his experiences. It's an enjoyable read from a unique perspective.

High Frequency Laughs

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. While many will not be interested in his tales of applying old school classical AI techniques to Wall Street problems, I was riveted: I had considered noodling with the old AI alien technology myself, back when I was first learning things like expert system shells. I sort of figured people had done so at some point, but finally reading about it from someone who was there was good fun. I disagree with some of his speculations: I don't think machine translation or related tricks are as important as he does -though such things might be important to the kinds of equity strats he describes. I suspect the people who can do this are useful because of how they think about things (probabilities + machine learning = optimal betting), but I suspect they're more "reading the tape" than parsing meaning from news feeds. I also don't agree with his opinions on derivatives. But, you know, if I only read stuff which I completely agreed with, I'd never learn anything new. For example, his description of a proposal for converting speculative equity in a house into tradeable equity is a very interesting idea, which I had only heard allusions to elsewhere. I don't agree with the idea, as I think inflating speculative bubbles is generally a bad idea, but it's a neat idea anyway. Even neater is his proposal for using

Must read for students of financial markets

This book is a must read for students of global financial markets; humorous, references to research further, broad perspectives of how technology and the markets intersected in the past and will continue to do so in the future. Highly recommended.

A fun and informative read. Couldn't put it down.

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.

Smart and independent thinking about the arcane world of the quant

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. Above all, it's subversively witty, encouraging the reader to roll his or her eyes at some of Wall Street's absurdities. He takes his subject seriously, but not himself. I recommend this highly to anyone who has a basic understanding of Wall Street but is fed up hearing about quants, electronic trading, etc. etc. and is desperate to lay hands on a straightforward work that will spell out everything they needed to know and were afraid to ask -- including some questions that they didn't know they needed to ask. I wish that more of the writing on complex financial issues being done these days was as accessible and helpful. Far too much of it feels more like taking your medicine -- or dong the assigned reading for a course you're not enjoying that much. Full disclosure: I know Dave, read his work in galleys and am overlooking my usual policy of not reviewing books by people I know on this occasion, because I think that more than ever before it's important to draw attention to the tiny handful of books that actually do help readers get to the point where they understand the basics of even complex finance. The more general readers that seek out this book, the better. Best of all, this book may be one part of Wall Street where you can truthfully