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Quantitative Analytics A Practical Guide To Quantitative Portfolio Trading Daniel Bloch 30th of December 2014 The copyright to this computer software and documentation is the property of Quant Finance Ltd. It may be used and/or copied only with the written consent of the company or in accordance with the terms and conditions stipulated in the agreement/contract under which the material has been supplied. Copyright © 2015 Quant Finance Ltd Quantitative Analytics, London Created: 14 January 2015 A Practical Guide To Quantitative Portfolio Trading Daniel BLOCH 1 QUANT FINANCE LTD eBook 30th of December 2014 Version 1.01 1db@quantfin.eu Abstract We discuss risk, preference and valuation in classical economics, which led academics to develop a theory of market prices, resulting in the general equilibrium theories. However, in practice, the decision process does not follow that theory since the qualitative aspect coming from human decision making process is missing. Further, a large number of studies in empirical finance showed that financial assets exhibit trends or cycles, resulting in persistent inefficiencies in the market, that can be exploited. The uneven assimilation of information emphasised the multifractal nature of the capital markets, recognising complexity. New theories to explain financial markets developed, among which is a multitude of interacting agents forming a complex system characterised by a high l