Computerized Hedge Funds and Trading Money Managers are Winning
From Bloomberg are some examples of the kinds of reports and new data supporting computerized money management that is state of the art and more nimble. See below:
“Hedge Fund Investors Dump Humans for Computers and Still Lose
…Investors are turning to model-driven funds in the hope that machines, detached from all emotional bias, are better placed to make money or protect their capital should markets turn volatile. “There is a general skepticism about the ability of discretionary macro managers to make money with rates at zero,”…
One reason investors are buying into computer-driven funds is their good performance in bad times…“Investors are favoring liquid and transparent strategies at the expense of traditional macro hedge funds which bear a certain amount of key-man risk,”
Wall Street’s Speed Demons Are Heroes
Across the wider world, Wall Street’s speed demons are all too often cast as the villains of the stock market. As computerized trading firms have become the dominant buyers and sellers of equities, they’ve been blamed for exploiting investors and causing bouts of extreme volatility…But in academic circles at least, high-frequency traders are more often treated like heroes.
– positive research has outnumbered negative by a 2-1 margin, a database search of the 30 most-cited papers on HFTs showed.
– Researchers found automated firms reduced trading costs, and contrary to popular opinion, improved market depth and stability.
“As a whole, the literature strongly supports HFTs being a net positive,”…which has been mentioned by other researchers more than 350 times as the most-cited paper.
The fact that the pendulum of academic opinion has swung decidedly in favor of HFTs has to do with the simple matter of having more, and better, data to analyze [HFT] …firms make them more stable and efficient, even when volatility surges, by quickly bringing prices back into line…HFTs improve market quality. They helped narrow bid-ask spreads, a measure of liquidity, and reduced short-term swings…trading costs have plunged more than 50 percent as electronic markets and HFTs emerged in the past decade.
…For now, however, most of the heavy-hitting research sides with the computers. And whatever academia ultimately concludes about HFTs, the important thing is that lawmakers and regulators can make better use of the findings to guide their policy decisions.
“There are undoubtedly positive aspects of HFT, but it is important to keep in mind that there could be drawbacks,”