I can give one example of where the conventional wisdom suggested one thing and the research said another.
The research topic was about diversity in the boardroom. There were many news articles stating that companies with diverse boards outperform those without them. We wanted to find out if there was a causal relationship or if it was just a correlation. Because if it’s a causal relationship, then we can use it for stock selection. But if not, we can just ignore it.
We found a data source that had a historical board diversity score (which if I remember correctly was effectively the percentage of the board that wasn’t white men) for large public companies. What I did was look through the data and found when the diversity score increased, and looked at stock returns of that company before and after that date, relative to others in that same industry.
What we found is that the relative returns of the company were good after the diversity increase, but they were even better before the diversity score increase. Simplifying, before the diversity score increase these companies were firing on all cylinders, and looked around at what else to improve, saw that the board wasn’t very diverse, and fixed that. And it wasn’t that the diverse board made the company less successful, but rather that even good companies cannot maintain outstanding stock performance for very long. In the end, we just ignored the board diversity score.
On the positive side, these firms are filled with bright people and tend to have top-notch equipment. But that’s separate from culture. And culture in these firms varies a great deal, just like tech company cultures vary a great deal.
Companies like Jane Street and Two Sigma were often compared to Google (before Google’s recent layoffs) in that they have bright people working in a collegial atmosphere, and most employees stay long term. Typically averaging ~50 hours per week.
Companies like Optiver, Citadel and SIG are known more as “sink or swim”. They give a certain amount of time for people to perform, and if they don’t they are out. But they are also known for paying their best performers even more. Because of the pressure to perform, hours can be intense at times.
As I wrote above, the education requirements vary by role.
Also, I didn’t mention anything about finance knowledge earlier. A lot of the most selective companies don’t care about finance knowledge at all. Their view is that they can teach finance knowledge more easily than they can teach math/CS talent. Examples that don’t care at all include: Arrowstreet, Citadel, DE Shaw, DRW, HRT, IMC, Jane Street, Jump Trading, Optiver, SIG, Two Sigma, Virtu.
On the other hand, companies like Fidelity, Numeric and Wellington do expect finance knowledge.
In terms of pipeline, some schools are targets. They include the usual suspects like HYPSM. But they also readily hire from colleges like CMU, Michigan, UT-Austin, UIUC although they may favor students from certain for specific roles. An interesting one is Baruch College, part of the City University of New York. It has a well-regarded trading center, and some students from there do land coveted trading spots.
Note that it’s not just about GPA. I know a Yale CS student with a 4.0 that was summarily rejected from just about every trading job he applied to, likely because he didn’t show the math background they were looking for. Likewise, I also know of students with lower GPAs that showed math ability through awards that were readily called in.
Most companies begin their process with an online assessment that is tailored for the specific role. Many companies send this out to anyone that applies, regardless of any other qualifications. Doing well on this is necessary for the companies to actually start considering someone as a candidate, but it doesn’t guarantee any further progress.