The first quantitative hedge fund was founded by a mathematician who mastered card counting
Edward Thorp, a mathematician who first conquered blackjack through card counting, used the same statistical principles to launch the world's first successful quantitative hedge fund.
In 1962, Edward Thorp published 'Beat the Dealer,' detailing how he used an early IBM computer to prove that blackjack could be won by tracking the ratio of high to low cards. After being barred from most casinos, Thorp applied his mathematical insights to the stock market. He utilized the Kelly Criterion—a formula for optimal bet sizing—to identify mispriced securities, achieving an average annual return of 20 percent between 1969 and 1988.
There's more to this story — open the app to keep reading.
Continue Reading in App
1 more paragraphs · plus a 1-question quiz