Apple picking in the fall is a requirement for all families with little kids in the Northeastern U.S. Or at least that is my understanding. My family fulfilled our annual duties last weekend, driving to upstate New York for the time honored tradition. On the way to the farm, visions of a beautiful day spent galavanting among lush apple trees, filling our (for some reason wooden) baskets to the brim with fresh, perfect apples, filled my head.  

But apple picking is not like that - not when you live in the (ironically named) Big Apple: New York City. To give some background, I’m a financial researcher, working on systematic strategies. One of the goals in my job is to engage in quantitative alpha research: building models to detect stocks that are mispriced, and thus “ripe for the picking”. Alpha is the holy grail of asset management: it’s return over and above the risk you are taking. It’s the unique return that cannot be explained by anything other than that you are smart, good at your job, and have found something in the market that nobody else has. 

I am not the first person to search for alpha. The notion of systematically recoverable “alpha” in financial markets has been around for a few decades, and given the riches that lay in store for those that find it, has attracted a lot of talent. In the early days of alpha research (I started 16 years ago, but even before that), the field was still young, and the alpha trees were full. Many people got rich trading what are now relatively well-known effects, especially in quantitative investing: value, momentum, carry, and trend. It’s too simplistic to say those people had it easy: they were the ones that even thought to do this in the first place, and they deserve the rewards of that discovery. But having discovered the orchard, the apples were plentiful and not hard to grab. 

That was my dream apple picking trip. But, just like searching for alpha, I was not the only person from New York City that decided to go apple picking that beautiful October day.

First, you can dream about the perfect day for a long while: the closest farms to New York City are an hour and a half to two hours away. And the journey ends by waiting in a 15-20 minute long line of cars to enter the farm. My car was in park for much of the wait. Once you finally get in, the farm is packed, and there are long lines for (subpar) food. More saliently, as you walk out into the apple orchard (almost three hours since you left your house), you annoyingly notice that every SINGLE apple at eye level has been picked.  

There is no more low hanging fruit,” you think. It’s fun to see the literal instantiation of a popular saying. You are suddenly cognizant to not let one bad apple ruin the bunch, and to be aware of exactly how far apples fall from the tree...but, all apple expressions aside, the lack of low hanging fruit is the most pressing issue. To get any good apples you have to climb the tree. And the more you are willing to climb, the better the apples are. The people willing to climb 15-20 feet into the tree had their pick of beautiful, perfect apples, but it was a lot of work. At 8 feet, the apples were good, but less good. The orchard was deceptive: rows of trees that had low hanging apples existed, but it was for a reason. Upon further inspection, those particular apples were good for decoration, but apparently not for, say, “eating”. 

In other words, the orchard was efficient. You could get good apples, but you had to work for them, and your bounty was in direct proportion to your effort. Collaboration was key: parent/child teams tended to work well, with the child willing to do the climbing, and the parent willing to spot and provide a height boost if needed. My son and I picked a bunch of great apples this way.  

Apple pickingSearching for alpha

Alpha research in 2019 is like apple picking outside of New York City in October. The orchard is already discovered. It’s very crowded - the easy apples have all been picked. Filling your basket with apples doesn’t depend so much on flashes of genius, but rather the willingness to put in the effort, look up at a 20 foot tall tree and say “I’m going to climb that.” Or more like “we’re going to climb that”, because if you try to do it yourself, you’ll lose out to others that have found ways to collaborate. Finding ways to scale your organization, er, family, in a way that puts you in the position to pick those apples, to find that alpha. And then even when you have it, savor those bites, because it may not last long. Apples rot in a week or so. Alpha decays over time as others discover it, and when it does, you’re back in your car, driving upstate for two hours, dreaming of the perfect apple.


This article is not an endorsement by Two Sigma Investor Solutions, LP or any of its affiliates (collectively, “Two Sigma”) of the topics discussed. The views expressed above reflect those of the authors and are not necessarily the views of Two Sigma. This article (i) is only for informational and educational purposes, (ii) is not intended to provide, and should not be relied upon, for investment, accounting, legal or tax advice, and (iii) is not a recommendation as to any portfolio, allocation, strategy or investment. This article is not an offer to sell or the solicitation of an offer to buy any securities or other instruments. This article is current as of the date of issuance (or any earlier date as referenced herein) and is subject to change without notice. The analytics or other services available on Venn change frequently and the content of this article should be expected to become outdated and less accurate over time. Any statements regarding planned or future development efforts for our existing or new products or services are not intended to be a promise or guarantee of future availability of products, services, or features.  Such statements merely reflect our current plans.  They are not intended to indicate when or how particular features will be offered or at what price.  These planned or future development efforts may change without notice. Two Sigma has no obligation to update the article nor does Two Sigma make any express or implied warranties or representations as to its completeness or accuracy. This material uses some trademarks owned by entities other than Two Sigma purely for identification and comment as fair nominative use. That use does not imply any association with or endorsement of the other company by Two Sigma, or vice versa. See the end of the document for other important disclaimers and disclosures. Click here for other important disclaimers and disclosures.

This article may include discussion of investing in virtual currencies. You should be aware that virtual currencies can have unique characteristics from other securities, securities transactions and financial transactions. Virtual currencies prices may be volatile, they may be difficult to price and their liquidity may be dispersed. Virtual currencies may be subject to certain cybersecurity and technology risks. Various intermediaries in the virtual currency markets may be unregulated, and the general regulatory landscape for virtual currencies is uncertain. The identity of virtual currency market participants may be opaque, which may increase the risk of market manipulation and fraud. Fees involved in trading virtual currencies may vary.

Recent Posts