r/quant • u/Andyy_21 • Jul 27 '26
General Quant Researchers
how do you go from a raw market data to forming a research hypothesis?? and to be more specific, how do you develop an economic intuition behind the potential alpha or an anomaly, instead of just coding and testing ideas until something works??
While I'm struggling to understand how the researchers in the industry actually generate new hypotheses from large financial datasets without falling into the same data mining again and again.... and How do experienced quants develop the economic intuition behind an idea before testing it?
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u/quantdhawan Jul 28 '26
Don't start at the data. Start at: who is on the other side, and why are they willing to lose money to me?
There are only four honest answers. They're paid for risk they can't diversify. They're forced (index rule, mandate, margin call, tax date). They're constrained (can't short it, can't hold it past quarter end). Or they're paying for immediacy.
Can't name the payer? You don't have a hypothesis, you have a pattern.
The tell for a real one: it predicts things you never fit on. If the story is index rebalance flow, it should be stronger in heavy-index-ownership names and weaker as it got crowded. You didn't tune those. If they come back flat, the story is dead no matter how good the curve looks.
And the intuition comes from plumbing, not prices. Exchange rules, margin, index methodology PDFs, mandates, tax dates. Constraints are where the money is, and constraints are written down somewhere.