Quant-Blame Game and ‘Crack Analysis’ Behind the Flash Crash
- Funds may not be big enough to cause dislocation, AQR says
- Volatility targeting, ETPs, CTAs come under heat amid selling
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Whenever there’s a sudden crash seemingly devoid of rhyme or reason, the first culprits in the firing line tend to be the “algos.”
But in today’s trading ecosystem where nearly everyone uses models at some point in the investing process, the phrase is effectively meaningless. Quants have gathered to defend their namesake amid the burgeoning narrative that trend-following strategies spurred the precipitous drop Monday in U.S. equities. JPMorgan’s widely-followed derivatives guru Marko Kolanovic is a key proponent of the latter view.