Ok so I just read an interesting blog post on how the current market is about to face another liquidity shock, this time in the equity markets because the big name players that are using market neutral strategies have been losing money and are in the process of deleveraging. Would love to discuss this with. This is a very interesting article and as much as I want to question its integrity it is very well written.
http://zerohedge.blogspot.com/2009/04/incredibly-…
Everyones thoughts Jimbo? Bondarb? Junkbondswap?
http://twitpic.com/3ajk2
hahah nice pic. interested in a response to this too though
ok so some of the market neutral/quants are sitting on the side because with overall investor risk-aversion the trading strategies employing mean reversion dont work as good as before. but those that arent playing are still sitting and waiting and watching, and they can jump in and provide liquidity in seconds if the market demands it strongly enough- why wouldn't they provide it? Surely there is a point, before catastrophic bid/ask spreads, where it becomes too compelling for them to stay on the sidelines? (or am I missing something here?)
But really his analysis is exaggerated anyways becase his concern about NYSE's lower weekly volume is unfounded- NYSE continues to lose significant market share to nasdaq, BATs, DirectEdge, etc. If that statistic was for lower aggregate volume on the cash equity markets in general, then it would be more relevant.
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