Tuesday, Aug 14, 2007
Credit Contagion Baby
New York Times: Pack Mentality Among Hedge Funds Fuels Market Volatility
On Wall Street, there is a rage against the machine.
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Many Wall Street analysts attribute the fluctuations in the stock market to computer models used by hedge funds.
Hedge funds with computer-driven or quantitative investment strategies have been recording significant losses this month.
The managers of these funds are the products of the trading desks of the big investment banks, like Goldman Sachs and Morgan Stanley, both of which have investment operations that use computer models.
Posted by lvmreader @ 08:01 AM (143 views) Add Comment
1 Comment
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1. Stoatgobbler said...
This overstates the case, but it is true that these models, usually developed by physicists and mathematicians, are very popular - or at least were very popular. I suspect that in a few months time people will realise that the statistical ideas on which these piles of sh*te are based work in a casino - but have absolutely no relevance to the real world where you spin the roulette wheel and it can come up 917 Blue - a number and colour you didn't even know were on the wheel!
In fact, as I was watching Richard Dawkins last night on C4, I got to thinking that belief in statistical models being able to predict something in the real world is just as crazy as believing in horoscopes and spiritualism. Total hocus, and it's time to bring 'em down! 6 Sigma event my a**e.