A Normally Reliable Quant Strategy for Stocks Goes Haywire
- Most liquid stocks are on their best run since 2009 recovery
- Move may signal speculative buyers entering a hot market
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Here’s one more piece of evidence that something’s amiss in the U.S. stock market: A usually reliable strategy used by quants is suddenly on the fritz.
Quantitative investors have long used liquidity signals to strengthen their automated models. Simply put, bets on the least traded stocks should, in theory, outperform the market because there’s a reward for taking on the extra liquidity risk.