Quantitative Investing Tools

Over the last several years, I have been teaching and practicing quantitative equity investing. Quantitative equity investing (as I term it), is simply using observable metrics (such as PE ratios, past performance, and other accounting/stock price variables) to rank and choose stocks, with little or no human intervention in the final investment decision. It is a term that is similar to terms like factor based investing, smart beta strategies, or systematic strategies.

The basic idea is that while most retail investors have been conditioned to invest in media darlings (generally a terrible idea) or cheap index funds (which is a fine strategy), certain segments (value stocks, current out-performers, etc.) of the market have historically consistently outperformed both the overall market as well as stocks du jour. With analytical tools and investment platforms becoming cheaper and cheaper, it is now possible for a retail investor with relatively small amounts of money to create quantitative strategies the focus on these outperforming segments and use these winning strategies to invest directly in equities.

Below are some tools, information and vendors to get started with quantitative equity investing platforms:


If you’re lucky enough to have access to a Bloomberg Terminal, the commands EQS <go> and EQBT <go> are all you need to create and backtest quantitative strategies. Bloomberg, being Bloomberg, has data for equities all over the world, and almost every data field imaginable. The one downside I found is that backtest requests are queued and it often takes a while to obtain results.

Equities Lab

The software I use right now is Equities Lab (available at www.equitieslab.com ) – it allows for creation and backtesting of quantitative strategies for US equities. It is a fast, easy to use package with up to date data which can be used, along with an appropriate brokerage account, for a turnkey quantitative investing solution. It’s also (relatively) cheap, with subscription options that range from $30 a month.


Quite frankly, almost any discount brokerage will do. Just be sure that your commissions from trading and rebalancing do not take too much off of your overall returns. For example, if you are starting with $10,000 and anticipate making 10% a year (or $1000) on your quantitative strategy – a strategy that trades 40 times a year at $6 per trade, will eat away $240 of that return, leaving you with only 7.6% instead of the full 10%.

Cheaper brokerages include Merrill Edge, which gives 30 free trades a month if you hold combined balances of $50,000  with them  and/or Bank of America ( http://info.bankofamerica.com/preferred-rewards/details/ ). That should be more than enough for most quantitative strategies with reasonable rebalances. If you need more, they give 100 free trades if you hold $100,000 or more with them.

Another popular cheap brokerage is Interactive Brokers, which charges a couple of dollars a trade. Unfortunately, it also has a monthly data fee of between $10-25 (depending on what data you get). Interactive Brokers has the added advantage of being able to link directly to other programs on your computer through an API. So you can run algorithms to automatically trade for you using Python, MATLAB, or any of your other favorite programming languages.


Having been fairly involved in using Equities Lab over the last few years, I have also organized my notes on using Equities Lab for quantitative investing and developed them into a book, “Principles of Quantitative Equity Investing,” available on Amazon ( http://www.amazon.com/Principles-Quantitative-Equity-Investing-Implementing/dp/0134192796  ) .

Alternatively, you can buy it from my publisher directly at :

Use the discount code EQUITY for a 40% discount, to reduce the price to about $36.

The book also includes an extended 5 month free trial of the software platform I use in my class, Equities Lab, available at www.equitieslab.com. Simply email your receipt from the book purchase to support@equitieslab.com and Equities Lab will generate a trial account for you. The value of the 5 month subscription is well more than the cost of the book and if you like the software and style of investing, there are options for a discounted subscription for the software after the trial ends.