They Still Haven’t Told You
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[Submitted on 1 Jan 2022]

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Abstract: The world’s stock markets display a decades-long pattern of overnight and
intraday returns seemingly consistent with only one explanation: one or more
large, long-lived quant firms tending to expand its portfolio early in the day
(when its trading moves prices more) and contract its portfolio later in the
day (when its trading moves prices less), losing money on its daily round-trip
trades to create mark-to-market gains on its large existing book. In the
fourteen years since this extraordinary pattern of overnight and intraday
returns was first noted in the literature, no plausible alternative explanation
has been advanced. The main question remaining is therefore which of the few
firms capable of profitably trading in this manner are guilty of having done
so. If any of this is news to you, it is because the people you trust to alert
you to such problems still haven’t told you.

Submission history

From: Bruce Knuteson [view email]


[v1]
Sat, 1 Jan 2022 17:55:44 UTC (5,589 KB)

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