Tuesday, August 19, 2008
They live and they die by the square root of pi
Greenspan is utterly clueless and unable to learn from his mistakes. Delusions of infallibility bring me to another subject: quantitative trading. Quantitative analysts have pursued a strategy based on the notion that the money to be made in stocks comes via mathematics rather than from company fundamentals. I believe that this strategy is responsible for much of the pandemonium we see on a regular basis. No market seems to be safe from these maniacal, algorithm-wielding computer beasts. In a way, their systems have made it possible (in the short run) for almost anything to trade at any price, whether foreign exchange, stocks or commodities in general.