INSIGHT, IIT-BOMBAY PRESENTS : THE INTERNSHIPS LIVE BLOG

This summer I worked in the research wing of a hedge funds firm. The job description was simple: find new formulae to predict the movements of stocks. Sounds interesting? Well it is, until you run out of ideas.

Before the intern, my idea was that we would be taught methods of predicting movements of prices of various stocks in this intern and that people do this all the time and earn a lot of money. Well, that’s not how it works in that one cannot actually predict the stock price, but one can earn a lot of money here and that takes skill. What actually is done is you design some indicators that give you a “hint” as to which way the prices are going to move. Some simple examples are intuitive enough to understand like if the price steadily increased for many days, chances are high that it will go down the next day. Things like that and more. So you try to use the data that you already have and try to find such directions in which the market is headed and use it to your advantage. Only difference being that instead of people interpreting these indicators, it was the computer that was supposed to take decisions of buying and selling, of course based on what you have told it to do, but on thousands of stocks. So here’s what my intern looked like.

All of this starts with getting familiar with the terms used. There aren’t too many terms and most of them are very logical so there is no problem in grasping them. Others are statistical tools that gauge your performance. The most important one that I used for was the Sharpe ratio and the information ratio. After that came the indicators. The first week generally goes into understanding the basics and all. It’s not that it takes that long to understand it but it does take a while to actively apply them. What we basically did was get familiar to the most popular of the indicators and how they are used to judge the prices.

The second week went in understanding the basics behind the indicators. It’s easy to make one but it is essential to understand the working especially if you want to improve the indicator, which is what we are looking for. Any one indicator cannot be trusted all the time, especially in the markets today that tend to go in one particular direction…down. Indicators are generally best in a steady or “sideways” market, where there is not clear trend. If there is any direction, it’s a different story.

Next comes using these indicators to actually buy stocks of appropriate companies. What I did was deal with 3000 stocks in the US and occasionally in other countries like Japan and European markets and came up with what is called an alpha for each of the stocks. Alpha in simple terms is relative probability of each stock to go up (or down). Relative to what?? Well… each other. It’s easy to talk in terms of 2 stocks but when 3000 stocks are to be considered, things are not as simple. You give each a number, indicative of how much probability that stock will have of going up. Someone else may be assigned a higher or lower number, which means that between the two, the higher numbered has a higher probability of going up. It looks simple enough but coming up with a simple formula can be a tough job, and boring too sometimes.

In the next week, we graduated to looking at blogs and articles on such things. By the end of 2nd week, I had taken to looking at chart patterns which I continued in the third week too. Chart patterns are basically formed by price vs. time graphs of a stock that are a direct effect of the psychology of humans. The “drive” that people get of buying and selling when someone like Harshad Mehta deals in a stock is a very good example of such a tendency. These are the factors that have nothing to do with the company or its performance or its expectation of doing good or bad. It’s just the herd mentality that we essentially have as traders. And analysing such patterns can be real fun.

Analyzing such patterns, I tried to make some of my own indicators, but landed up remaking a lesser known indicator. But it was great kick finding out that I was on the right track.

This went on for another week and by the end of it, I was begging my mentor for a change. So next week we took a break from this routine to do a small programming project. It involved making the best strategy for a famous casino game. Turns out even the simple games where you think casino can lose are made so that they never lose. The rules of the game ensure that. And doesn’t matter if the player wins or loses, at the end of the day the casino always wins. Unfortunately it took me a long time to realise that there was nothing wrong with the results I was getting in the simulations. I was meant to lose; I just had to reduce the loss. Once we were done with this in a couple of weeks, we got back to our previous task.

The next week I tried to combine more than one indicator, something that a trader usually does. Mostly, one would look at as many indicators as possible before one takes a decision. But doing this for thousands of stocks would take an insane amount of time or traders. However, if one can instruct a computer how to handle them correctly, one can trade at a higher frequency and for many stocks. The best multiple indicators for combining would be those based on completely different principles - things that do not have a common source of change. And if both of their predictions agree, then we would have a much stronger indication of an apparent trend. That being said, I really began to appreciate what our eyes can analyze in one glance because programming for just two indicators together was a pain. Only in the last week was I successfully able to combine two to make a useful formula.

In the end, I think I met most of the goals of the internship. I needed to make atleast 4 good formulae which I did, found out for myself that Bangalore IS expensive and got to know fellows from iit-d. It was a great learning experience.

Well to start of I’m a Meta DD and my intern has nothing to do with metallurgy. I actually interned at a consultancy firm called Illumine Knowledge Resources Ltd. which is a well established firm with several high profile clients like SBI, BPCL and so on. The kind of consulting they do is what you call Transformational Consulting or Knowledge Consulting or some other fancy word you can make up (just remember to add consulting after that, you see it adds gravity).

• The Work Involved:

Ok lets get serious. They basically analyse a company’s organistional structure & the different employee profiles, after which they design and conduct ‘Interventions’. These Inteventions are basically workshops for emplyoees in which they are trained to function more efficiently (now you see why SBI is a client). Apart from being very very expensive (read: 9 figure consultancy fees) these are very well designed with trainers, videos, tool kits etc.
Now to what I did. I was part of a illustrious (read: IIM MBAs :P) team working on a ‘Career Design’ website for an European Investor. I cant for several reasons reveal details about the website but what I can do is descibe my experience. To be honest the two most important things you need to do well as a consultant is “Googling & Powerpointing”. Well what I mean is you have to know how to mine data, analyse it & present it effectively. When you communicate with clients you don’t have to use fancy english but you need to be very lucid i.e. you should literally be able to put your thoughts into bullet points & when you talk to consultants you’ll also notice they often use figures and flowcharts as well.
The work hours are as flexible as they get. 5 working days a week is a myth, hell you might have to work sundays as well if you are a full time employee. The intern was a lot of fun because of the company I had in terms of the team I was working with & overall it was a very wholesome experience.

Ok, so I have this habit of using suggestive language which some of you might find a bit offensive, but I don’t care. Yes, I’m being insolent.

So, today is basically my second-last day here (at Philips) and this is my last entry here (on this blog). The project has finished, i.e. my work in the project has finished, which did happen last week itself. I’ve been practically jobless for the past 7-8 days, but I don’t mind that at all. Now, I must admit that the last few days have been the best- we’ve had presentations (I didn’t make any), treats and cricket matches(at a field near the office). Our new head, who’s illiterate about India (he’s a European), tried his hand at cricket for the first time. His brief stint was quite impressive- he managed a second-ball duck (and not a first ball), he got catch-out (and not bowled) and he picked up a catch and fielded well. The whole match experience was great. The research team here has got some really nice people. So that ways, the work environment is good.

My opinion about the company has changed from ‘I hate this’ to ‘I don’t care’ to ‘This is ok’ to ‘I might consider it’. The projects these people are doing here are really interesting, everything being in the biomedical field. They’ve got projects on Heart-diseases, cancer detection, Pregnancy and child-care, etc. They’ve published some n papers during the development of each of these projects and looking at that I can say these guys are doing some productive work.

With the second quarter’s results showing some improvement, I expect the scale of projects to go up and some more interesting projects to be undertaken in the future. Hence, the future prospects look promising. Reputation-wise, there can be no complaints- Philips is a leading brand.

That’s all I guess. Tata.

I am particularly giddy while writing this due to a grand birthday party we had last night, but hopefully this blog will put off the hangover. I am doing my research internship at The University of Arizona, commonly referred as UoA. Since this blog has to serve as a guideline to prospective students, let me describe the logistics involved.

I have a particular interest in Medicinal Chemistry even before I came to IITB. So I started applying for research internships during my second year for the following summer, and that is when I contacted this Prof. here at UoA. I should throw this out right now: Current state of research funding in the US  is horrible. Universities are closing down departments and cutting on graduate intakes rapidly, so be prepared if you receive a lot of negative replies. So I got a similar reply ( this was in Nov,2007), but the Prof. encouraged me to apply next year and if he had funding he would take me in. Finally, I ended up joining the Nucleic Acid Chemistry research group at IITB last summer, which turned out to be the best decision I ever made. This is my advice to anyone who is serious about going into research, join groups here and try to gain some experience. The internship should serve the purpose of consolidation, ultimately leading to a graduate school where you will have an advantage of knowing the field well and coming up with interesting projects. Back to the discussion, so I applied  again last December and this time luck favored me. I was accepted with full funding and a variety of projects to choose from.

I was basically accepted into a big collaboration, which spanned from UoA to Moffitt research center in Florida and has some 6 investigators working on it. The field is called ‘Peptidomimetics’ which is essentially synthetic peptides mimicking the function of naturally occurring  proteins. These can be used as drugs to target a variety of ailments, in my case the group works on Cancer as the target. The current work proposes a new route to target a variety of cancer receptors in tumor cells and the grant is around $800,000. Medicinal chemistry is definitely a growing field and provides attractive career options both in India and abroad. If you have an understanding of biomolecules, this may very well be what you are looking for.

The biggest hurdle I faced was time, I had to be here on May 18 and my papers arrived from US on May 6. It was due to a variety of factors: you are asked to submit a number of documents to the host in order to process the DS-2019 application and in my case, the final acceptance came in April. I had a backup option in Bremen,Germany in case this hadn’t worked out, so keep applying because you never know when things go wrong. Also, keep soft copies of your passport, proof of parental income, transcript and medical insurance ready so that you can cut down the delays. Getting a US visa is time-consuming but not hard, you should be prepared to answer any questions the interviewer may have and you’ll be set. I got my Visa on May 14, and four days later landed in the land of opportunity:USA.

The A-mountain in Tucson. This is also the official logo of UoA.

Tucson is the second largest city in Arizona after Phoenix, which is of course a mammoth in comparison. The Us-Mexican border is 100 km away, so the area has a pronounced hispanic population and culture, which is actually good for Indians as the Mexican culture is quite similar to ours, whether it’s family dynamics or culinary experiences. Only exception, they put beef in everything, so be prepared to spend a bit more on food if you respect the cow like me! Other than that, you have a chance to experience the excellent work the Indian exports are doing here. I am working with an Indian post-doc here and have seen countless Indians handling some of the most sophisticated projects. It is indeed inspirational to see the amount of success Indians have  achieved through hard work and dedication and the world salutes us for it. Everyone here is aware of the IITs and the grindstone we call ‘JEE’. I am reaching towards the conclusion of my project and my internship, but this experience has all but re-assured me that I stand to learn and enjoy as a researcher in the future. If you are uncertain about how you’ll end up after doing a Ph.D.,  it will be a very full-filling experience from what I have seen. Hope this has been an interesting read and do post comments if you wish to.

Later!