, Columnist
Indexing, Boredom and Butter
Also orphan CDS, prime brokerage leakage, crisis flashbacks and a unicorn index.
Indexing, quants, etc.
Here is an intriguing opinion article from Paul Woolley and Dimitri Vayanos arguing that "Action must be taken to stop quants exploiting weakness." The thesis is that quantitative funds rely on either value (buying underpriced stocks) or momentum (buying overpriced stocks and then selling them at even higher prices), and that in either case they need some sucker on the other side of the trade. And "logic suggests that benchmarkers are the 'patsies' that fulfil this role": Index funds and quasi-indexers are obliged "to chase bubbles, overpaying for high-risk stocks they do not like and selling low-risk ones they do like." The quant funds profit from exploiting these predictable behaviors by indexers: