June 5, 2010 Leave a comment
A Professor of Economics, Barnard College, Columbia University & External Professor, Santa Fe Institute. Rajiv Sethi helps to tie in academic work with current market events. He seems to also be a rather open minded professors which engages the econblogosphere in a meaningful way and also supports them in their logic and well displayed ideas.
He has made some insightful on the recent flash crash on 7 May.
The point I was trying to make is this: the problem lies not so much with the method of trading (algorithmic or otherwise) but with the underlying strategies that are being implemented. Algorithmic trading allows technical strategies to profit and proliferate, and markets dominated by technical analysis will tend to be unstable. If destabilizing strategies are prevented from taking losses when they misfire, the result will be more frequent and significant departures of prices from fundamentals. Hence my concern over the cancellation of trades. Read more of this post