Chasing the Same Signals: How Black–Box Trading Influences Stock Markets from Wall Street to Shanghai
Author(s): Brian R. Brown (Author)
Publisher: John Wiley & Sons
Publication Date: 28 April 2010
Edition: 1st
Language: English
Print length: 208 pages
ISBN-10: 0470824883
ISBN-13: 9780470824887
Book Description
Conventional wisdom suggests that markets are efficient, random walks and that stock prices rise and fall with the fundamentals of the company. How then have black-box traders prospered and how do they exploit market inefficiencies? Are their strategies on their last legs or will they adapt to the new landscape amidst the global financial crisis? Chasing the Same Signals is a unique chronicle of the black-box industry’s rise to prominence and their influence on the market place. This is not a story about what signals they chase, but rather a story on how they chase and compete for the same signals
Editorial Reviews
From the Inside Flap
A year before the subprime financial crisis materialized, there was a subtle warning that global equity markets were in distress. During August 2007, there was a 30 percent gap between the top stocks and the worst stocks; but the index itself was unchanged. Weeks later, prominent hedge funds came forward with similar stories about suffering massive losses in a single day. It was the world’s first stock market panic-by machines that were Chasing the Same Signals.
Over the past decade, “black-box” trading has come of age. These firms use mathematical formulas and computer wizardry to buy and sell stocks. The industry attracts the likes of mathematicians and physicists and their investment philosophy is a marriage of science and economics. Quantitative trading has a long history, but the industry was transformed when technology allowed investors to trade stocks electronically.
The 2007 crisis didn’t mark the demise of the black-box firms; rather the opposite. They were the first to feel the impact of the financial crisis, but were the best prepared during the aftermath. And now they’ve grown: more than 50 percent of today’s investors are computers.
The rise of black-box trading has led to a number of important questions: Are they creating volatility or stabilizing the market? Why are large price swings and reversals more prevalent than ever? What happened to the buy-and-hold investor? And what does their trading mean to mom-and-pop investors who interpret the health of our economy through CNN each morning?
In
Chasing the Same Signals, author Brian Brown offers fascinating insights into the world of cyber-trading and speculates on a future where Wall Street is dominated by computers.
About the Author
Brian R. Brown is a Wall Street veteran in quantitative trading. He spent eight years as an executive at Morgan Stanley in Hong Kong, serving as director of pan-Asia systematic trading, where he was influential to Asian reforms that increased market efficiency and attracted global investors. Brian formerly researched and managed statistical arbitrage strategies for Trout Trading Management, one of the legendary Market Wizards. He has advised the industry’s largest hedge funds on how to adapt their models in emerging markets. Brian was born in Canada and graduated from the University of Waterloo. He currently lives in Hong Kong with his wife, two children and the family dog, Hotrod.
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