11–20 of 79 posts
Is computerized trading more or less herdlike than human trading, or exactly the same? Popular Delusions And the Madness of Algos !
I suspect it's the same, but operates thousands of times faster.
Many (if not most) quantitative hedge funds are dollar neutral, which means they have one dollar short for every dollar long. There are typically additional constraints about having equal long/short exposure on each industry and investing style (momentum, value, etc). So contrary to the article, most of these funds don’t take broad bets for or against the market. What they are really doing is correcting the relative…
Many (if not most) quantitative hedge funds are dollar neutral, which means they have one dollar short for every dollar long. There are typically additional constraints about having equal long/short exposure on each industry and investing style (momentum, value, etc). So contrary to the article, most of these funds don’t take broad bets for or against the market. What they are really doing is correcting the relative…
How does that not result in a net neutral investment return? Forgive my ignorance if this answer is obvious
Many (if not most) quantitative hedge funds are dollar neutral, which means they have one dollar short for every dollar long. There are typically additional constraints about having equal long/short exposure on each industry and investing style (momentum, value, etc). So contrary to the article, most of these funds don’t take broad bets for or against the market. What they are really doing is correcting the relative…
How does that not result in a net neutral investment return? Forgive my ignorance if this answer is obvious
Many (if not most) quantitative hedge funds are dollar neutral, which means they have one dollar short for every dollar long. There are typically additional constraints about having equal long/short exposure on each industry and investing style (momentum, value, etc). So contrary to the article, most of these funds don’t take broad bets for or against the market. What they are really doing is correcting the relative…
How does that not result in a net neutral investment return? Forgive my ignorance if this answer is obvious
Earlier quoted context omitted.
>> As the article points out, passive funds, which have become a dominant force in the stock market, own the same stocks as everyone else in the same proportion. THIS. This is how it works. They also have similar basis prices for their positions, and similar pain thresholds. It's not a big surprise that when Institution XYZ reaches its' pain threshold and stop loss orders are used, a few more dozen Institution ABC, D…
How is that any different from previous bear markets? I swear I remember reading the same analysis in 1987 after the crash. Human behavior (even human-programmed behavior) is pro-cyclic. Everyone wants the same stuff and makes the same decisions with the same input. I don't see anything notable about this market cycle as compared with previous ones at all, only the jargon is changing.
As the article points out, passive funds, which have become a dominant force in the stock market, own the same stocks as everyone else in the same proportion. When passive funds as a group have net outflows, all their holdings must be reduced in roughly the same proportion. But passive funds as a group cannot reduce their holdings by selling stocks to each other! It's impossible to take water out of a boat by scoopin…
>> As the article points out, passive funds, which have become a dominant force in the stock market, own the same stocks as everyone else in the same proportion. THIS. This is how it works. They also have similar basis prices for their positions, and similar pain thresholds. It's not a big surprise that when Institution XYZ reaches its' pain threshold and stop loss orders are used, a few more dozen Institution ABC, D…
Passive funds have no pain thresholds which force them to sell. Investors in them may. But that’s a difference in how individual investors’ risk tolerances are abstracted to broad market pricing, not a change in those risk expressions themselves.
As the article points out, passive funds, which have become a dominant force in the stock market, own the same stocks as everyone else in the same proportion. When passive funds as a group have net outflows, all their holdings must be reduced in roughly the same proportion. But passive funds as a group cannot reduce their holdings by selling stocks to each other! It's impossible to take water out of a boat by scoopin…
Right now, the pool of people putting money into the market has been steadily increasing as Millenials enter the workforce. Boomers are retiring, but not really in large numbers yet, so the overall number of folks saving for retirement has been continually increasing since Boomers started entering their prime earning years in the early 1980s.
However, the peak of the Boomer years will soon start entering retirement soon (~2020) while the early Boomers are starting to die off. And the generation after Millenials - who will start comprising the workforce in 2020 - is much smaller than the Millenial generation. There are fundamental issues with demographics that can't be papered over by financial engineering: a smaller working-age population supporting a larger dependent population (absent massive technological advancement in care) = lower standard of living for everyone.
Demographically, this would play out as a generation-long bear market, but markets tend to correct as soon as everyone adjusts their expectations for the future. That implies a sudden and massive crisis at some point with stock market levels correcting to the yields and prices of the 1970s, adjusted for inflation. That would imply an S&P 500 of about 370 (down ~95%) and interest rates in the 10% range.
Earlier quoted context omitted.
How is that any different from previous bear markets? I swear I remember reading the same analysis in 1987 after the crash. Human behavior (even human-programmed behavior) is pro-cyclic. Everyone wants the same stuff and makes the same decisions with the same input. I don't see anything notable about this market cycle as compared with previous ones at all, only the jargon is changing.
It's not any different other than the speed it happens at. 20 years ago it would have taken minutes/hours for some of the drops we've seen to materialize. Now you can watch the NQ drop 100 points in less than 5 minutes, 20 years ago that would have taken hours, possibly all day. People had to wait on quote services via satellite, telephone calls to their floor traders, or actually be in the pits during the selloffs.…
Twenty years ago was 1998. Ten years before that, Black Monday was faster and more vicious than anything we've seen since. It remains "the largest one-day percentage decline in the DJIA" [1].