mardi 5 octobre 2010

“First, we do the quantitative, then the qualitative analysis” Taming Uncertainty within the Asset Management Industry

Communication at the Graduate Symposium of the "Challenging Models in the Face of Uncertainty" Conference, organized by the CRASSH in Clare College Cambridge (UK), on September 28-30 2010.

Financial asset managers trade securities on capital markets on behalf of investors who have given them a discretionary mandate to do so. They provide a risky service in the sense that one cannot forecast with full certainty the returns that their investment decisions will earn. Yet, investors are confronted with the question of the quality of asset management services. Multimanagers, who bundle funds in their portfolios, just as other financial asset managers bundle securities, are directly confronted with the problem of not knowing in advance the ability of underlying funds managers to earn good returns.

In order to cope with uncertainty and to rationalise their speculations, multimanagers produce two types of knowledge, dividing them between “quantitative” and “qualitative” analyses. In durkheimian words, the division between “quantitative” and “qualitative” knowledge mirrors a primitive form of classification that is widely used in knowledge institutions. However, using ethnographic data combining participant observation in a multimanagement firm and in-depth interviews with asset management professionals, I discovered that the distinction between quantitative and qualitative analyses does not reflect what multimanagers do.

In practice, quantitative analysis actually refers to statistical analysis of past price series, in order to discover the probability distribution that multimanagers assume to be driving such series. Qualitative analysis actually describes the search for the social conditions that are believed to generate the probability distribution. Qualitative analysis is far from being numbers or calculations free. Combining both analyses, multimanagers establish the reasons why they should believe or not in the reproduction of past performance.

Unveiling the epistemic fallacy that distinguishes between “quantitative” and “qualitative” work allows a better understanding of the social division of work among actors engaged in speculative practices. It may help defetishisise the use of calculation tools and help calculation practices become more effective.

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