Many wall street companies spent hundreds of millions of dollars over the last few decades or so hiring very high IQ math whizzes (ie Wall Street “Quants”) to design and implement extremely sophisticated stock & equities buy-sell timing programs that would protect their assets. Is there any indication of how well these programs worked for their users in the recent market meltdown. Did they help or not?
Some assert they may have exacerbated the problem. A majority of trades on the major US exchanges are performed by automated trading programs, retail investors (you, me and Joe Schmo) account for only a small portion of trading activity.
No one can answer your question for certain. Maybe the market would have tanked even further without those algorithms. Maybe it wouldn’t have. No one knows where the stock market would go without those trades occurring.
Computer trading was also a major suspect in the crash of 1987.
IMHO, trading algorithms aren’t any smarter than by-your-gut speculators in the pits, but they are a lot faster. Any damage that a trader with a bad day can cause can be caused 100-fold by an algorithm with itchy bits.
That’s not to say computer trading is necessarily a bad thing, because the opposite is also true when the programs are successful.
That’s not really the question the OP asked, though, which was how well the transaction-timing systems worked for their users.
You wouldn’t expect them to have worked well. But most of the quant funds that lost money in July-August 2007 had made it back by October or so. I don’t know off the top of my head how they’ve been faring lately.
actually they work quite well, especially in very volatile markets.
monkey wrench in the system was when short selling of finance stocks was banned temporarily. most algorhythmic trading programs were not designed to quickly agjust for this. no doubt that only slowed things for a couple days.