{"id":48485,"date":"2019-09-15T16:26:09","date_gmt":"2019-09-15T21:26:09","guid":{"rendered":"https:\/\/olduvai.ca\/?p=48485"},"modified":"2019-09-15T16:26:12","modified_gmt":"2019-09-15T21:26:12","slug":"hedge-fund-cio-the-biggest-market-player-is-15x-leveraged-thats-why-when-it-starts-going-wrong-youre-out","status":"publish","type":"post","link":"https:\/\/olduvai.ca\/?p=48485","title":{"rendered":"Hedge Fund CIO: &#8220;The Biggest Market Player Is 15x Leveraged; That\u2019s Why When It Starts Going Wrong, You\u2019re Out&#8221;"},"content":{"rendered":"\n<h3 class=\"wp-block-heading\"><a href=\"https:\/\/www.zerohedge.com\/markets\/hedge-fund-cio-biggest-market-player-15x-leveraged-thats-why-when-it-starts-going-wrong\">Hedge Fund CIO: &#8220;The Biggest Market Player Is 15x Leveraged; That\u2019s Why When It Starts Going Wrong, You\u2019re Out&#8221;<\/a><\/h3>\n\n\n\n<p class=\"wp-block-paragraph\">\u201cWanted to make sure you\u2019re seeing this,\u201d texted a PM from one of those multi-manager monstrosities.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">\u201c8 standard deviation move in the Momentum Factor in 5-days,\u201d he added. I heard his heart pounding all the way from Australia.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><strong>\u201cGuys who defended positions in the Q4 selloff all got fired, so the message is real clear \u2013 when things start getting weird, take immediate corrective action.\u201d&nbsp;<\/strong>And I imagined the quiet panic consuming firms that leverage their capital at multiples that would make a Lehman risk manager blush.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Hedge Fund Arrowgrass to Return Capital, Close After Fresh Redemptions<\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><strong>\u201cI\u2019m more convinced than ever that one of these days, this kind of 8 standard deviation event is going to crash the market,\u201d he texted, having puked his position without the slightest idea why the move had even started.<\/strong><\/p>\n\n\n\n<ul class=\"wp-block-list\"><li><strong>Factor Definitions (Momentum)<\/strong>: Momentum is the empirically observed tendency for rising asset prices to rise further and falling prices to keep falling. For instance, it was shown that stocks with strong past performance continue to outperform stocks with poor past performance in the next period with an average excess return of about 1% per month. Momentum signals (e.g., 52-week high) have been shown to be used by analysts in their buy and sell recommendations. The existence of momentum is a market anomaly, which finance theory struggles to explain.<\/li><li><strong>Factor Definitions (Value):\u00a0<\/strong>The value factor is based on a belief that stocks that are inexpensive relative to some measure of fundamental value outperform those that are pricier. the best-known work on the value factor was carried out by Fama and French in their 1992 paper (The cross-section of expected stock returns), which concluded that low price-to-book ratio was the most predictive definition of value. <\/li><\/ul>\n\n\n\n<p class=\"wp-block-paragraph\">&nbsp;\u2026click on the above link to read the rest of the article\u2026<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Hedge Fund CIO: &#8220;The Biggest Market Player Is 15x Leveraged; That\u2019s Why When It Starts Going Wrong, You\u2019re Out&#8221; \u201cWanted to make sure you\u2019re seeing this,\u201d texted a PM from one of those multi-manager monstrosities. \u201c8 standard deviation move in the Momentum Factor in 5-days,\u201d he added. I heard his heart pounding all the way [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_monsterinsights_skip_tracking":false,"_monsterinsights_sitenote_active":false,"_monsterinsights_sitenote_note":"","_monsterinsights_sitenote_category":0,"footnotes":""},"categories":[2],"tags":[13503,15427,690],"class_list":["post-48485","post","type-post","status-publish","format-standard","hentry","category-economics","tag-eric-peters","tag-one-river-asset-management","tag-risk"],"_links":{"self":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/48485","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=48485"}],"version-history":[{"count":1,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/48485\/revisions"}],"predecessor-version":[{"id":48486,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/48485\/revisions\/48486"}],"wp:attachment":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=48485"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=48485"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=48485"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}