# Quant 4.0: Engineering Quantitative Investment with Automated, Explainable and Knowledge-driven Artificial Intelligence

arXiv: https://arxiv.org/abs/2301.04020 · HTML: https://mlsanity.com/paper/2301.04020/

## Key facts

- Cited by 6 papers in the map (data through 14 Oct 2026).
- Builds on 116 of its 372 references that are in the map.
- First posted on arXiv 13 Dec 2022.

## Builds on (most cited first, 30 of 116)

- [Attention Is All You Need](https://mlsanity.com/paper/1706.03762/) (2017)
- [BERT: Pre-training of Deep Bidirectional Transformers for Language Understanding](https://mlsanity.com/paper/1810.04805/) (2018)
- [Learning Transferable Visual Models From Natural Language Supervision](https://mlsanity.com/paper/2103.00020/) (2021)
- [Language Models are Few-Shot Learners](https://mlsanity.com/paper/2005.14165/) (2020)
- [An Image is Worth 16x16 Words: Transformers for Image Recognition at Scale](https://mlsanity.com/paper/2010.11929/) (2020)
- [Distilling the Knowledge in a Neural Network](https://mlsanity.com/paper/1503.02531/) (2015)
- [Retrieval-Augmented Generation for Knowledge-Intensive NLP Tasks](https://mlsanity.com/paper/2005.11401/) (2020)
- [Evaluating Large Language Models Trained on Code](https://mlsanity.com/paper/2107.03374/) (2021)
- [Grad-CAM: Visual Explanations from Deep Networks via Gradient-based Localization](https://mlsanity.com/paper/1610.02391/) (2016)
- [A Unified Approach to Interpreting Model Predictions](https://mlsanity.com/paper/1705.07874/) (2017)
- [XGBoost: A Scalable Tree Boosting System](https://mlsanity.com/paper/1603.02754/) (2016)
- ["Why Should I Trust You?": Explaining the Predictions of Any Classifier](https://mlsanity.com/paper/1602.04938/) (2016)
- [Zero-Shot Text-to-Image Generation](https://mlsanity.com/paper/2102.12092/) (2021)
- [SQuAD: 100,000+ Questions for Machine Comprehension of Text](https://mlsanity.com/paper/1606.05250/) (2016)
- [Learning Phrase Representations using RNN Encoder-Decoder for Statistical Machine Translation](https://mlsanity.com/paper/1406.1078/) (2014)
- [Dense Passage Retrieval for Open-Domain Question Answering](https://mlsanity.com/paper/2004.04906/) (2020)
- [Finetuned Language Models Are Zero-Shot Learners](https://mlsanity.com/paper/2109.01652/) (2021)
- [Switch Transformers: Scaling to Trillion Parameter Models with Simple and Efficient Sparsity](https://mlsanity.com/paper/2101.03961/) (2021)
- [Sequence to Sequence Learning with Neural Networks](https://mlsanity.com/paper/1409.3215/) (2014)
- [Deep Compression: Compressing Deep Neural Networks with Pruning, Trained Quantization and Huffman Coding](https://mlsanity.com/paper/1510.00149/) (2015)
- [Deep contextualized word representations](https://mlsanity.com/paper/1802.05365/) (2018)
- [Pre-train, Prompt, and Predict: A Systematic Survey of Prompting Methods in Natural Language Processing](https://mlsanity.com/paper/2107.13586/) (2021)
- [Learning both Weights and Connections for Efficient Neural Networks](https://mlsanity.com/paper/1506.02626/) (2015)
- [node2vec: Scalable Feature Learning for Networks](https://mlsanity.com/paper/1607.00653/) (2016)
- [Megatron-LM: Training Multi-Billion Parameter Language Models Using Model Parallelism](https://mlsanity.com/paper/1909.08053/) (2019)
- [DARTS: Differentiable Architecture Search](https://mlsanity.com/paper/1806.09055/) (2018)
- [Modeling Relational Data with Graph Convolutional Networks](https://mlsanity.com/paper/1703.06103/) (2017)
- [Knowledge Distillation: A Survey](https://mlsanity.com/paper/2006.05525/) (2020)
- [Neural Architecture Search with Reinforcement Learning](https://mlsanity.com/paper/1611.01578/) (2016)
- [An Empirical Evaluation of Generic Convolutional and Recurrent Networks for Sequence Modeling](https://mlsanity.com/paper/1803.01271/) (2018)

## Built on by (most cited first, 6 of 6)

- [Alpha-GPT: Human-AI Interactive Alpha Mining for Quantitative Investment](https://mlsanity.com/paper/2308.00016/) (2023)
- [Cognitive Alpha Mining via LLM-Driven Code-Based Evolution](https://mlsanity.com/paper/2511.18850/) (2025)
- [Advancing Financial Engineering with Foundation Models: Progress, Applications, and Challenges](https://mlsanity.com/paper/2507.18577/) (2025)
- [Methods for Acquiring and Incorporating Knowledge into Stock Price Prediction: A Survey](https://mlsanity.com/paper/2308.04947/) (2023)
- [Synergistic Formulaic Alpha Generation for Quantitative Trading based on Reinforcement Learning](https://mlsanity.com/paper/2401.02710/) (2024)
- [Trading Strategy Optimization via Textual Gradient](https://mlsanity.com/paper/2610.03128/) (2026)

## Abstract (arXiv)

Quantitative investment (``quant'') is an interdisciplinary field combining financial engineering, computer science, mathematics, statistics, etc. Quant has become one of the mainstream investment methodologies over the past decades, and has experienced three generations: Quant 1.0, trading by mathematical modeling to discover mis-priced assets in markets; Quant 2.0, shifting quant research pipeline from small ``strategy workshops'' to large ``alpha factories''; Quant 3.0, applying deep learning techniques to discover complex nonlinear pricing rules. Despite its advantage in prediction, deep learning relies on extremely large data volume and labor-intensive tuning of ``black-box'' neural network models. To address these limitations, in this paper, we introduce Quant 4.0 and provide an engineering perspective for next-generation quant. Quant 4.0 has three key differentiating components. First, automated AI changes quant pipeline from traditional hand-craft modeling to the state-of-the-art automated modeling, practicing the philosophy of ``algorithm produces algorithm, model builds model, and eventually AI creates AI''. Second, explainable AI develops new techniques to better understand and interpret investment decisions made by machine learning black-boxes, and explains complicated and hidden risk exposures. Third, knowledge-driven AI is a supplement to data-driven AI such as deep learning and it incorporates prior knowledge into modeling to improve investment decision, in particular for quantitative value investing. Moreover, we discuss how to build a system that practices the Quant 4.0 concept. Finally, we propose ten challenging research problems for quant technology, and discuss potential solutions, research directions, and future trends.