Rocket Science and Investment Management: Closer Than It Seems

April 01, 2008 at 04:00 AM
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Although it may seem surprising to many, Walter Gerasimowicz says that his careers as scientist and an investment advisor are not as dissimilar as they would seem at first glance.

"A lot of [investment management] is mathematically driven," he says. "Much of the same mathematics that I utilized as a scientist in looking at reactions and kinetics and movements at molecular levels is the same mathematics that applies to the reversion of interest rates to the mean, for example, or, to the calculation of portfolio allocations where you are minimizing risk through the minimization of a variance/co-variance matrix. It's the same thing, but you're applying it to price movement as opposed to molecular movement or vibrational movement at the molecular level. So there are those types of similiarities.

"If you are someone who has been blessed with a creative side and you can take techniques, concepts and so on and apply them in one field, you can often apply them in others. And I've been blessed with that ability," he adds. "We've applied certain techniques from the scientific world to that of the financial world."

There is of course one major difference between being a scientist in a laboratory and a financial advisor on Lexington Avenue in Manhattan–people. "The scientific world is easier to deal with, because you don't have in those mathematical equations that little factor out at the end there we call epsilon, or emotion," says Gerasimowicz with a smile. "How you quantify emotion in the world of finance and volatility, I don't know."

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