The Cost of High-Frequency Traders and Latency Arbitrage

A new study released by the Financial Conduct Authority (FCA) in the U.K. has reignited concerns around the ability of predatory high-frequency traders (HFTs) to profit on equity trades by using a technique called “latency arbitrage.” Latency arbitrage is a practice used by HFTs that utilizes a fragmented market structure and speed to “snipe” stale…

Superforecasting: The Art and Science of Prediction

Making predictions and forecasting the future are integral parts of everyday life, yet it’s unlikely individuals realize the amount of predictions one makes in a day. The use of heuristics or “rules of thumb” are ingrained in human psychology and help people quickly determine courses of action with limited information at their disposal. Deciding what…

Surviving in the Longest Bull Market as a Bear

There is an old saying that “bull markets don’t die of old age, they get murdered by central banks.” This makes a lot of sense, given that central banks control short-term borrowing rates and use that policy tool as a way to influence the economic cycle in an orderly fashion. The Federal Reserve (arguably the…

The Benefits of Preparing for the Unknown

While many investors may define success for their investment portfolio from a return-centric perspective, arguably the more important factor to focus on is risk mitigation. Once you’ve defined a way to quantify the utility function inherent in a risk-centric framework, then return expectations can follow. Otherwise, the strategy is at risk of being abandoned when…

Nonzero: The Logic of Human Destiny

In Robert Wright’s first book, “The Moral Animal,” Wright examines how evolutionary forces influence the behaviour of individuals, and the impact this has on the human psyche. Though not necessarily billed as a follow-up to ”The Moral Animal,” in “Nonzero,” Wright explores whether there could be a scientific reason to believe that history is directional,…

ETFs Aren’t Always the Most Cost-Effective

Over the last few years there has been a lot of media attention on ETFs (exchange traded funds) and how they have precipitated a “fee war” in the asset management industry. Large asset managers like Vanguard and BlackRock have been accused of inciting a “race to the bottom” in investment management fees, squeezing margins for…