NoNameProf

The recent tumoil in stock market certainly does not reflect what efficient market thesis. It is hard to argue why pretty much all stockes should dropped when the mortgage/building industry is not doing so well. There is certainly an artifical answer to it. Many big players (e.g., institutional investors) have positions they need to cover during a time of tumoil, and they may be forced to sell positions in other holdings (that they would otherwise continue to maintain) to provide the fund. Due to their large volumne, such selling induces a spiraling effect for those unrelated stocks.

How do you take advantage of this? well, conceivably, one can model how the various quant models employed by major players work, and make predictions about how each will react to certain market conditions, given each of them’s current holding.  if one knows about enough number of such quant models, a profitful model can be developed.

ha, a model to model models …