State Street Global Advisors, Boston, will sponsor the Laboratory for Financial Engineering at the Massachusetts Institute of Technology's Sloan School of Management in Cambridge. In addition to donating an undisclosed sum to LFE, SSgA will work with LFE to test new quantitative financial models and applications, said Tony Foley, managing director of SSgA's Advanced Research Center.
"Basically, we're going to look at things they come up with that may or may not lead to implementable strategies or have real-world application; we can help shape some of the basic work that they do, and we would then want to find out how to apply it in practice," Mr. Foley said.
Among those SSgA will be working with is Andrew Lo, director of financial engineering at the Sloan School. "We have a very strong academic community here in the Boston area, and we wanted to lever that," said Mr. Foley.
One of the first projects SSgA will help test is "natural language processing," an artificial intelligence computer program. While the program may not rise to the level of the "Data" android from "Star Trek," it could potentially be used to determine the stock sentiment from an annual or quarterly report, or even an analyst report or news article.
"If this technology develops, one can potentially glean forecasting information from those sources," said Mr. Foley.
"In two years from now, we may be making a big announcement about this; or we may not say anything about it because it didn't work out."