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Crisis Alpha, Reflexivity & ‘Anti-diversification’ | Savvy Investor

In our most recent guest blog for the Quant Conference, we discussed ‘The Pursuit of Edge’ and how the quest for alpha for today’s quants is constantly evolving. As investment professionals have discovered from the Covid-19 fallout, an edge that can be successfully executed during a financial crisis can not only be desirable, but also an essential investment strategy.

Andrew Perrins, CEO and Founder of Savvy Investor, outlines how the study of historical financial crises, their progenitors, alleged reflexive feedback loops and ‘anti-diversification’ philosophies can serve as useful starting points for quants wishing to ‘forward model’ the future

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“When things get volatile, they get complicated”.

Crisis Alpha

Having witnessed a decline in volatility over the last decade, global financial markets are now experiencing a measurably higher volatility regime. For those caught in the mêlée of ‘limit ups’ and ‘limits downs’, the feeling may be one of entrapment in a Wild West gun fight of statistically aberrant price swings. For the experienced quant however, these machinations might be viewed as lessons in edge where signals may be parsed through the noise.