Asset pricing

Quantum Computing as the Means to Algorithmic Trading

9.December 2022

The topic of quantum computing has been gaining popularity recently, and both the scientific community and investors seem to have high hopes for its future. It seems that this brand-new technology could revolutionize various aspects of computing as we currently know them. Great contributions could be made in the fields of medicine and healthcare, security, and computability [1], as well as in the field of finances, which interests us here at Quantpedia the most. Quantum computers are especially great in optimization tasks, so optimizing a portfolio could be one of the key contributions in our interest. [2] In this article, we would like to introduce the concept of quantum computers, their current state, their potential use in finance, and more.

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Do SPACs Generate Abnormal Returns?

23.July 2021

Special Purpose Acquisition Companies (SPACs) raise capital through IPO under special conditions intending to acquire an existing company (private equity). On the one hand, it looks like an attractive opportunity for investors – SPACs bring a lot of excitement and prospects of large profits since the management can find a valuable opportunity. If no acquisition is made, then investors simply get their money back. For firms that are being acquired, it is a much easier and faster way how to get publicly traded – without investment banks and IPOs. On the other hand, SPACs are very speculative and even frequently overpriced, which attracts many critiques. While SPACs are nothing new, recently they have got quite popular, which raises several questions: are they worth attention or do they bring abnormal profits? A fascinating insight into SPACs provides a novel research paper of Chong et al. (2021). The study explains the fundamental principles of SPACs, but most importantly, it shows us the risks and returns of such investments. Despite the popularity and the seemingly attractive opportunity of SPACs, results show us that the invested capital could be instead used elsewhere. Although the success depends on the sector in which is the SPAC interested or whether the acquisition was successful, overall, it is hard to find abnormal returns in these investments.

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