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WSJ article: "Quantopian pays users for the algorithms that perform best"

Quantopian, for example, lets users create their own algorithms free of charge and pays users for the ones that perform best.

Quantopian: Please explain details. Does "perform best" mean "have the highest annualized profit"? Highest Sharpe ratio?

All I know is that Quantopian has promised to pay the authors of the algorithms that won the contest (by earning all required badges and achieving the highest score, in part through low volatility and low return, ie. low performance) and made money over the following 6 months. Not the same thing.

6 responses

Hi Andre,

Quantopian is in the process of launching a crowd-sourced hedge fund where we pay algorithm authors a share of the returns their algo generates on an ongoing basis.

We start with the same basic scoring criteria from the Open paper trading competition and then dig deeper into algorithm performance using the tear-sheet analysis that Justin shared recently (e.g. stress testing, risk exposures, turnover). We are already working with the first cohort of algos that we will allocate capital to, but we're also investing into the research process of identifying algorithms that will most likely show stable, profitable out of sample performance.

You can find more detail on what we're looking for (and not looking for) in this webinar I gave a few weeks back talking about our process for selecting algorithms for the fund.

best, Jess


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Thank you, Jessica. So you do not currently pay, but intend to pay if and when your hedge fund starts to operate, correct?

We're actually pretty close to our first allocations. We're on track to sign our first algorithm authors next month. The biggest obstacle right now is track record. We're waiting for some of the contest algorithms to have 6 months of good out-of-sample history.

If you don't have your best algorithm in the contest yet, you should. Get your track record started so that we can evaluate your algorithm this winter.

So you have not made your first allocations yet, but intend to make them this winter?

We intend to make the first allocations in the next month or so. We are looking for at least 6 months out of sample track record before we make an allocation - so an algorithm submitted today could be eligible for an allocation as soon as February.

Thank you for clarifying, Jessica. "An allocation in the next month or so" is not the same as paying algo writers now. You might want to contact the WSJ reporter and ask her to publish a correction.