(Harvest) A recent FT article, “Rise in the new form of ‘portfolio insurance’ sparks fear – Popularity of trend-following funds – and their promises – carry echoes for some of 1987 crash ” focused on the threat of trend-following to create selling pressure on equity markets. This speculative topic has been a recurring theme for decades and has been extensively researched. The empirical question is very straight forward. Do futures prices lead cash prices and are futures prices driven by systematic trend-followers? That is, is there a positive feedback loop whereby the selling of equity futures by some strategies will lead to more selling and a price crash? The research on the impact of speculators has generally shown that this is not an issue.
rend-following, Portfolio Insurance, and Market Selling Pressure
This entry was posted in Syndicated. Bookmark the permalink.
