After five years of studying the quant investing phenmena, I arrived to the conclusion that it is based on a mistake. The stock exchange generates immense quantities of numbers which can be graphed and processed, and one can calculate averages, B&S and all kind of correlations and indices. This property of the stock market that it is amenable to mathermatical manipulation generates the wrong impression that the market is ruled by mathematical laws. And that using math and statistics, we can "control" or predict what will happen. This is a mistake.
The problem is that the market is full of people who knows to use mathematics and is using it all the time. Math is fundamental to calculate compound interests, amortization, present value of a cash stream and so on. The numbers obtained ib this type of math are 100% true and reliable. But these highly numerate people tend to fall into the mental trap of thinking that the mass of financial data that the markets are vomiting out by the second is of the same nature and quality, that applying the Black and Scholes equation produces numbers of the same worth as applying the compound interest formula. But these are two completely different class of numbers.
If I am at it, lets notice that the newspaper headline method of investing is even less valuable. Today there is uncertainty if Greece will be able to pay debts due and the market value of some unrelated entity, say Teva Pharm, sinks 5%. Tomorrow there is a rumor that Greece will pay this month's coupons, so Teva rises. Some investors dont believe that there is any linkage, but they do believe in "sentiment" which is controlled, so they believe, by the headlines.
So what works? Inside information works. Knowledge of a particular industry or sector works. Hard work works.