"Goldman Sachs ... revealed that a flagship global equity fund had lost over 30 per cent of its value in a week because of problems with its trading strategies created by computer models. In particular, the computers had failed to forsee recent market movements to such a degree that they labelled them a '25-standard deviation event'-- something that happens once every 100,000 years or more. ... 'People say these are one-in-a 100,000-years events but they seem to happen every year', says Satyajit Das, a consultant to hedge funds and investment banks. 'This episode should make people ask questions about models--I think it could lead to a real reassessment", ft.com, 14 August.
These models are jokes. Anyone with an understanding of economics and finance, particularly the efficient capital markets hypothesis, should have seen that the models are just a new form of technical stock market analysis.
These models are jokes. Anyone with an understanding of economics and finance, particularly the efficient capital markets hypothesis, should have seen that the models are just a new form of technical stock market analysis.
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