When Computers Met Finance

(Bloomberg View) -- Ed Mendel first met Ned Davis in the 1970s at J.C. Bradford & Co., a traditional broker-dealer. Mendel, this week's guest on Masters in Business, found there was an appetite for Davis’ insightful technical analysis among the firm's institutional clients as a risk-management tool.

The two became intrigued by the idea of analyzing the markets with a new tool: computers. At the time, charting was done by hand and quantitative analysis was an academic endeavor, primarily consigned to university mainframes.

Very few realized that computers could be used to create and clean market databases that would allow a much more in-depth analysis and charting of various asset classes. When Mendel and Davis asked for a $30,000 computer in 1979, their boss turned them down. Not too long after, Ned Davis Research, the institutional quantitative-research firm, was born. Davis did the number-crunching and Mendel developed the business model. In the process, they created one of the largest stock and bond research followings among institutional investors.

Mendel is now retired, but is active as a philanthropist and is part owner of the Atlanta Falcons football team.

Some of his favorite books are cited here; the transcript is here.

You can stream/download the full conversation, including the podcast extras, on BloombergiTunesOvercast, and Soundcloud. Our earlier podcasts can all be found on iTunesSoundcloudOvercast and Bloomberg.

Next week, we speak with Cornell psychology professor Tom Gilovich, author of "How We Know What Isn't So: The Fallibility of Human Reason in Everyday Life.”

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

Barry Ritholtz is a Bloomberg View columnist. He founded Ritholtz Wealth Management and was chief executive and director of equity research at FusionIQ, a quantitative research firm. He blogs at the Big Picture and is the author of “Bailout Nation: How Greed and Easy Money Corrupted Wall Street and Shook the World Economy.”

To contact the author of this story: Barry Ritholtz at britholtz3@bloomberg.net.

For more columns from Bloomberg View, visit http://www.bloomberg.com/view.

©2018 Bloomberg L.P.