3 replies to this topic

[nimblebear]

Along with the characters using it. U.S. stock futures sharply lower for second day Overseas central banks pour nearly $100 billion more By Steve Goldstein, MarketWatch Last Update: 8:41 AM ET Aug 10, 2007 LONDON (MarketWatch) - U.S. stock market futures were pointing to another dark day of trading on Friday following the plunge in the last session, with markets again rattled by credit-market jitters, prompting a fresh injection of cash by overseas central banks. S&P 500 futures, in volatile moves throughout the morning, dropped 18.8 points at 1,438.90 and Nasdaq 100 futures dropped 20.5 points at 1,925.00. Dow industrial futures dropped 152 points. On Thursday, the Dow industrials saw its second-heaviest one day plunge since 2003, with selling again accelerating during the last hour of trade. Worries about the strength of hedge funds and the halting of three BNP Paribas funds contributed to concerns about credit-market conditions. The Dow finished with a 387-point loss, the Nasdaq Composite dropped 56 points and the S&P 500 fell 44 points. Analysts at Citigroup said investors using quantitative strategies, or computer models, are having a particularly difficult time. "The unexpected and dramatic rise in volatility over the last month has created a difficult environment for many quantitative investment managers," they said. "Many stock selection factors that are used in most quantitative models, such as, value, quality, price reversal, and earnings momentum have produced increasingly poor performance."

[OEXCHAOS]

Analysts at Citigroup said investors using quantitative strategies, or computer models, are having a particularly difficult time.
"The unexpected and dramatic rise in volatility over the last month has created a difficult environment for many quantitative investment managers," they said. "Many stock selection factors that are used in most quantitative models, such as, value, quality, price reversal, and earnings momentum have produced increasingly poor performance."

Translation: "The over-optimized curve fitting that appeared to be the key to the lock stopped working when the trend changed."

FWIW, it sure looks like good old fashioned TA is working just fine, if not better than ever.

Mark

[nimblebear]

Analysts at Citigroup said investors using quantitative strategies, or computer models, are having a particularly difficult time.
"The unexpected and dramatic rise in volatility over the last month has created a difficult environment for many quantitative investment managers," they said. "Many stock selection factors that are used in most quantitative models, such as, value, quality, price reversal, and earnings momentum have produced increasingly poor performance."

Translation: "The over-optimized curve fitting that appeared to be the key to the lock stopped working when the trend changed."

FWIW, it sure looks like good old fashioned TA is working just fine, if not better than ever.

Mark

Here is the whole problem with the space using them - once the dominoes start to fall nobody knows how far it unwinds and how much other stuff will be taken with it. Many funds are inter-realted and interconnected. Thats why the notional value of 300 trillion in derivatives or so should scare people, because everything and everyone has hedged each other and other losses. Is the VIX really high enough yet? There could be a lot more fear b4 this one is over.


"Many players in this part of the hedge-fund business have similar positions and use lots of leverage, or borrowed money, to increase their bets. However, that magnifies even small losses. Some of these hedge funds also have relatively permissive redemption periods, allowing investors to take their money out every month, with 30 days' notice or less.
So if losses trigger investor redemptions, these funds may have to sell lots of their positions. That, in turn, puts more pressure on the historical relationship between related securities, handing more losses to other hedge funds in the space.
If such positions are sold by lots of managers at the same time, the most leveraged funds get hit the hardest, possibly forcing big liquidations of portfolios, which triggers a chain reaction. "

[OEXCHAOS]

Some might also be short. M