Predatory Trading and Crowded Exits (eBook) [eBook]
New thinking on market volatilityby James Clunie
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Description of Predatory Trading and Crowded ExitsIn this book, James Clunie looks at a series of market phenomena that involve security prices moving temporarily away from their 'fair value', creating opportunities for traders to profit (and the risk of losses for the unaware).
These phenomena have only recently begun to be well understood and key among them are those known as 'predatory trading' and 'crowded exits'. The author examines these on three levels. Firstly, he describes the basic principles and theory behind each phenomenon,
to build a solid framework for the way a trader should think about these situations. Secondly, he examines the accumulated empirical evidence of these situations. This gives an idea of what generally happens in these situations, and what the profit opportunity and the risks might be like. Finally, the author considers a number of individual cases to illustrate what can happen to traders in practice. Often, these will be special situations or extreme events from history, but always cases from which the trader can learn.
By understanding these phenomena thoroughly in this way, a trader can gain an edge over others in the market. In the first instance by avoiding becoming the victim of the phenomena and secondly by using detailed knowledge of these situations to (legally and ethically) profit from the events.
This book is for traders looking to gain an edge through a superior understanding of how markets work, both in theory and in practice. It will also be of interest to longer-horizon investors who are seeking to avoid timing errors, and to risk managers wanting to understand better the subtleties of risk beyond traditional risk statistics.
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About James ClunieJames Clunie works at Scottish Widows Investment Partnership (SWIP), where he is responsible for managing a UK equity long-short fund and a long-only fund. Previously, he was at the University of Edinburgh for four years, conducting research into stock lending and short-selling. He also set up and ran their Masters programme in Finance and Investment. Prior to this, Clunie worked at Murray Johnstone International, where he was head of asset allocation, and at Aberdeen Asset Management, where he was head of global equities. He graduated with a BSc (Hons) in Mathematics and Statistics and recently completed his PhD on indirect short-selling constraints, both at the University of Edinburgh. He is a chartered financial analyst.
Contents of Predatory Trading and Crowded ExitsAbout the Author
Chapter 1. The Ecology of Markets
Chapter 2. Predatory Trading
Chapter 3. Crowded Exits
Chapter 4. Stop Losses
Chapter 5. Manipulation
Chapter 6. Final Thoughts
Appendix 1. The Market Model
Appendix 2. Abnormal Returns