At the beginning of the crisis, no one knew that it would turn out like this.
At the beginning, it was just a batch of 500 1000 snowballs knocked in, and people watched the fire from the other side, recalling the past of Hong Kong with "I kill u later", and sighing that Mr. Tang had returned to zero overnight. Later, the brokerage trading desk was lit like a firecracker, and the stock index ** discount expanded, and the annualized discount once exceeded 50%, and the neutral strategy faced huge pressure on the basis.
Close the position, close the short, the long should also be flat, the ordinary neutral, the leverage-neutral DMA, the wind slow structure with leverage should be flat, everyone's bulls have more or less bought a group of illiquid small **, these small ** rotate every day, in the past year, with the well-known identity of the "micro-cap stock index", it has brought a 40% increase in 2023, attracting quantitative incremental funds, and also clustering overcrowded positions.
Quantitative longs neutral, DMA, long-short structure, wind slow structure, snowball, once these beautifully packaged financial product structures are opened, they are so similar inside.
The liquidation brought about a chain reaction, with extreme environments such as the extreme stampede of small and medium-sized tickets, the extreme reversal of short-term styles, the collapse of liquidity, and the rapid convergence of the basis.
Statistics lose their meaning, and black swans scatter.
At the beginning, the Wang Wang team only concentrated on the **CSI 300 ETF, he bought his, the snowball knocked the snowball, and the quantified buy the quantitative receipt, and the excess years were quiet, and they were at peace with each other.
Beginning on February 5, the PAW team began to pull the big leopard on the 500 ETF and 1000 ETF, and the CSI 500 rose by 1197%, the quantitative model facing a huge excess drawdown is like a herd, focusing on selling small caps** and holding 500,1000 constituent stocks instead. The receipt is stampede.
In the widely circulated "Death of the Mountain Guard", a dilemma in the process of stampede is alluded to:
The positions of the DMA strategy are placed on the trading desk of the brokerage's proprietary trading, and as of now, the entire public offering institution brokerage proprietary system is still shrouded in a disciplined environment that restricts net selling. It can't be net selling, you can only sell small tickets to buy big tickets on the long side, and the short side has also changed from IM to IC, which continues to exacerbate the tearing between large and small tickets, constituent stocks and non-constituent stocks.
Beta**, alpha retracement, basis discount, trading crowded tail risk like a black hole, swallowing everything.
The after-autumn reckoning after the stock market crash came unexpectedly.
After trading on February 20, a private placement was restricted from trading by the Shanghai and Shenzhen Stock Exchanges for three days, and a public censure procedure was initiated.
The ticket shows that in the first minute of opening on February 19, on the Shenzhen Stock Exchange, 137.2 billion; On the Shanghai Stock Exchange, sell 11 in 1 minute9.5 billion. In that minute, the overall transaction volume of the two cities was more than 30 billion, and one accounted for 7% of the trading volume of the two cities.
A more black-bellied speculation is that February 19 is the first day of the opening of the Year of the Dragon, and there is a small composition before the opening, requiring institutions to try to maintain the net half an hour before the opening and the first half hour to prevent the impact on market stability and ensure a good start.
The 3 billion sell order, was it intentionally or accidentally sold to the person who was required to make a net **?
Should quantitative neutral products be redeemed? ”
Should the small-cap strategy be redeemed? ”
Should the public offering be redeemed? ”
What should I do if I am trapped by quantization? ”
How long does it take for the excess to be repaired? ”
The same question is not only asked by customers about sales, sales is asked about headquarters, but also quantification is asking itself.
Looking through the various information statements issued by the managers, it is nothing more than that:
Did you intervene manually?
Why did you intervene Why not?
Why is the intervention wrong? Why is it wrong not to intervene? Didn't intervene at the beginning and then intervened, why was it wrong twice?
Will it be wrong next time? When will it be improved?
On the road of queuing up to be scolded and apologized, quantification and subjectivity are finally, ruthlessly, and empathetic.
The subjective strategy has been beaten by the quantitative strategy for several years, a large number of FOF** is no longer worthy, and it is no longer subjective, and the product access end of the wealth line has not been on the end for a long time, and it cannot be sold subjectively.
Open the shelves, they are all quantitative, neutral, long and short, t0 and high-frequency**, these bells and whistles, which seem to provide stable and low-volatility returns.
Neutral double killing, quantitative hitting the street, securities lending T0 stopped, long and short arbitrage has nothing to do, high-frequency ** has not been returned, where do these funds that pursue stable and low-volatility reporting go?
I would like to know too.
Roll the agio? I can't get out of it for a month, and it's gone. Buy debt? 30Y is already one of the most crowded trades in the market. Buy CSI 300 with a coupon of 2%? Is it okay to take a pure long exposure for this gain?
Is the condemned quantification just this one? What about subsequent customer redemptions and channel blocks? All quants are facing the same redemption pressure, and if you pull out the network cable of this house, will there be eggs under the nest?
In the beginning, the crisis has nothing to do with you, and later, the crisis has nothing to do with you, and in the end, you die from the crisis.
A similar situation has been repeated again and again in history.
In August 2007, Quant Quake, the liquidity crunch of the U.S. quantitative strategy triggered an industry stampede, and in the first 10 days of the month, all quantitative factors were generally **, and the earnings quality factor even appeared more than -20 standard deviations violently**. A group of quants on Wall Street collectively suffered a huge drawdown. The same crowded trade, the same stampede.
From the beginning of 2013 to October 2014, only the CSI 300 stock index ** hedging era, **CSI 500 ChiNext index, with CSI 300 hedging, a simple neutral strategy can obtain a stable and rich excess, 14 November started to cut interest rates, more than 30 trading days Shanghai rose 30%, at the same time, with the IF premium, the neutral strategy was sniped. The same style switch, the same stop-loss liquidation.
The subjective huddle at the beginning of 2020 moved the hearts of all people, and the reversal of cyclical stocks in September 2021 and the double killing of stock traders are still vivid.
More recently, in the United States, the Russell 2000 has gained -32% relative to the Nasdaq 100 in the past year, and if the Nasdaq 100 is replaced by the Big 7, the difference will be even greater.
Style is the devil, and similar stories are playing out simultaneously in two completely different markets.
From 2022 to 2023, a two-year bear market, quantification, as the only type of strategy that can provide incremental funds and bring net inflows on the liability side, is not only off the altar, not only a big loss of vitality, but a big liquidation and reshuffle.
The era of quantification is not over, but the actors on the stage of this era have appeared on the stage and left the stage, and it is time to change.
After the clearing, the survivors will be rewarded with residual liquidity, will get a deeper moat and stronger excess return capacity after iteration, will become more disciplined, will put down their bodies, and use more human-like words to try to interpret everything that happens in the model.
But first, you have to live until after the storm.
As we all know, the ultimate meaning of the entire asset management industry is:
Find the strongest beta and call it alpha
Or. Find the weakest beta and then defeat it and say you have alpha
Now. Weak beta, hugging each other
In order not to make yourself fall
Broken alpha, standing upright
Like a rotten creed.
*This article refers to the operation instructions of a number of quantitative managers and investor letters, and I would like to thank Mr. Song for his poetry submission.
It's really not me".
Big Leopard pulls. Micro-cap stocks, DMA and quantitative huddles.
The whole Big A is filled with an optimistic atmosphere.