Markets Acting Odd? Round Up the Usual Suspects
Quant funds take a lot of unwarranted blame whenever volatility soars or seems unusually low.
Quant funds are not Wall Street’s villain.
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It’s tough to be an equity analyst. Markets are hard to predict or explain. It helps to have some usual suspects to round up when all else fails, and one of the most usual is quantitative funds. Many people are suspicious of mathematics in general, probably because they find it mysterious.
A recent Wall Street Journal article blamed low stock market volatility on “revenge of the quant funds” while Goldman Sachs Group Inc. said quant funds were causing increased volatility. Then an analyst at the firm warned that quant funds were about to sell stocks, while the Financial Times said quant buying was propping up equity prices. Meanwhile, a strategist at Deutsche Bank AG estimates that quant and fundamental investors haven't been this divergently positioned since 2019, but an article in IPE argues that the two are working in tandem to weaken the link between volatility and prices in equity markets.