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Hi Fred,
Monday, October 20, 2003, 7:12:30 AM, you wrote:
F> IMHO fast desktop processors & programs like AB do for trading what
F> 3rd and then 4th generation programming languages did for
F> programming. Unfortunately a lot of the time this just amounts to
F> more people making stupid decisions faster, especially after they've
F> all read the same theoretical texts.
I'm not talking about theoretical texts or decisions. I'm talking
about huge segments of daily volume, increasingly huge segments, that
are trading on a *complete* lack of sentiment or fundamental or even
technical analysis. Such trading, like indexing, destroys to a large
extent the pricing efficiency of individual shares. This efficiency
may return to some extent once the programs stop, but the programs
can run the logical trader out of her position before rationality
finally overrides (if indeed it can) what the programs have done. And
the programs never really stop now. These days *everything* is
indexed, including the indexes themselves. ^^_^^ You just cannot
escape such a huge influence on the market, one that has grown
dramatically over the past few years, and one that looks to get even
stronger in the future. Today's markets trade more and more, every
day, on a basis that completely ignores fundamental or technical
concerns. This is market behavior that is changing, IMO.
Yuki
F> --- In amibroker@xxxxxxxxxxxxxxx, Yuki Taga <yukitaga@xxxx> wrote:
>> Hi Fred,
>>
>> Monday, October 20, 2003, 6:38:20 AM, you wrote:
>>
>> F> Market behavior will continually change after that ...
>>
>> F> Change ? from what ? into what ? I guess this is the part I
F> don't
>> F> follow. To me there is nothing new in market behavior now that
>> F> didn't exist last month, last year, last decade, last century,
F> but
>> F> clearly those that take a short sighted view of history and the
>> F> market action that made up that history will clearly never see
F> it.
>> F> It's a forest and trees thing ...
>>
>> In terms of human behavior, nothing has changed, and nothing is
>> likely to change anytime soon. But there have been not-so-subtle
>> changes in market behavior. I would cite as one example, the
>> explosion in program trading. We all know this bogeyman has been
>> around for a while (remember, it was the scapegoat in 1987, when it
>> was just a small sliver of the total pie), but I wonder just how
F> many
>> people understand what a market driver this has come to be, dwarfing
>> its influence of just a few years ago.
>>
>> About a decade ago, programs accounted for about 15 percent of total
>> volume. Today, programs are accounting for more than 40 percent of
>> total volume (more than 500 million shares a day in the US, or
F> nearly
>> the entire average daily volume of just a decade ago) and the
>> percentage of volume attributable to programs seems only to rise.
F> So
>> there is one instance in which I would suggest that market behavior
>> has changed. However, I largely subscribe to the spirit of what you
>> are saying.
>>
>> Yuki
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