#Quant Invest Chicago and #HFT World Chicago: Market microstructure and implications for quant managers
Simon Emrich, Executive Director of the Institutional Equity Division at Morgan Stanley spoke today at Quant Invest Chicago. He noted the concentration of strategies, both active and passive, in asset management in recent years. Commonality in systems, models and technology have made trading less complex over time. The number of investors in the market has decreased over time as professional asset managers have gained more AUM. This, in turn, has led to the predictability of the actions of these managers, whether they are passive ETFs, stat arbs or HFTs.
Investment horizons of asset managers has shortened over time. Quant factor strategies have underperformed recently due to the frequent mean reversion of the factors. This is due to the concentration of assets in these managers. The trading day can be broken up into stages, with predictable behavior patterns. Price discovery at the open, institutional portfolio rebalancing in the AM and early PM and Beta-driven trading late in the day, with large volume at the open and the close.