Course Hero Logo

AutoTrading Economist Oct 2019.pdf - March of the...

Course Hero uses AI to attempt to automatically extract content from documents to surface to you and others so you can study better, e.g., in search results, to enrich docs, and more. This preview shows page 1 - 5 out of 15 pages.

March of the machinesThe stockmarket is now run by computers,algorithms and passive managersSuch a development raises questions about the function of markets, how companies are governedand ±nancial stabilityFOct 5th 2019 | NEW YORKPrint edition | Briefingifty yearsago investing was a distinctly human a±air. “People would have to take eachother out, and dealers would entertain fund managers, and no one would know what theprices were,” says Ray Dalio, who worked on the trading ²oor of the New York Stock Exchange (nyse) in the early 1970s before founding Bridgewater Associates, now the world’s largestSubscribeLog in or sign upManage subscription
hedge fund. Technology was basic. Kenneth Jacobs, the boss of Lazard, an investment bank,remembers using a pocket calculator to analyse ±gures gleaned from company reports. Hisolder colleagues used slide rules. Even by the 1980s “reading theWall Street Journalon yourway into work, a television on the trading ²oor and a ticker tape” o³ered a signi±cantinformation advantage, recalls one investor.Since then the role humans play in trading has diminished rapidly. In their place have comecomputers, algorithms and passive managers—institutions which o³er an index fund thatholds a basket of shares to match the return of the stockmarket, or sectors of it, rather thantrying to beat it (see chart 1). On September 13th a widely watched barometer published byMorningstar, a research ±rm, reported that last month, for the ±rst time, the pot of passiveequity assets it measures, at $4.3trn, exceeded that run by humans.Get our daily newsletterUpgrade your inbox and get our Daily Dispatch and Editor's Picks.Email addressSign up now
The rise of ±nancial robotisation is not only changing the speed and makeup of thestockmarket. It also raises questions about the function of markets, the impact of markets onthe wider economy, how companies are governed and ±nancial stability.America is automating
Investors have always used di±erent kinds of technology to glean market-moving informationbefore their competitors. Early investors in the Dutch East India Company sought outnewsletters about the fortunes of ships around the Cape of Good Hope before they arrived inthe Netherlands. The Rothschilds supposedly owe much of their fortune to a carrier pigeonthat brought news of the French defeat at the Battle of Waterloo faster than ships.During the era of red braces and slide rules, today’s technological advances started to creep in.Machines took the easier (and loudest) jobs ²rst. In the 1970s ³oor traders bellowing to eachother in an exchange started to be replaced by electronic execution, which made it easier foreveryone to gather data on prices and volume. That, in turn, improved execution by creatinggreater certainty about price.

Upload your study docs or become a

Course Hero member to access this document

Upload your study docs or become a

Course Hero member to access this document

End of preview. Want to read all 15 pages?

Upload your study docs or become a

Course Hero member to access this document

Term
Winter
Professor
N/A
Tags

Newly uploaded documents

Show More

Newly uploaded documents

Show More

  • Left Quote Icon

    Student Picture

  • Left Quote Icon

    Student Picture

  • Left Quote Icon

    Student Picture