BofA: The Market Is No Longer Efficient

Friday, March 17, 2017
By Paul Martin

by Tyler Durden
ZeroHedge.com
Mar 17, 2017

Almost exactly 8 years ago, in April of 2009 we wrote for the first time that as a result of the confluence of unprecedented central bank intervention meant to prop up risk prices which distort markets in the long run, and the rising dominance of HFT and algo trading strategies, which distort price formation in the ultra-short term, the market is no longer a (somewhat) efficient, discounting mechanism, but has in fact been “broken.”

Now, in a note released overnight by BofA’s Savita Subramanian, the equity analyst comes to the same conclusion: the market is no longer efficient, primarily as a result of a wholesale scramble for short-term, data-driven trading gains, which have made a mockery of fundamental analysis and a focus on long-term investing profits.

Here are some of her observations:

Stocks for the long-term is an all but forgotten concept today. The rise of short-term investment strategies, which tend to rely on access to better, faster and larger stores of data and information, has attracted trillions of dollars of capital, compressing equity holding periods and likely exacerbating spikes in short-term volatility.

Managed futures funds (also known as CTAs), which tend to trade based on quantitative algorithms, have grown rapidly over the past several decades. According to BarclayHedge, their assets have grown to over 250bn, making up close to 10% of the total hedge fund universe.

The Rest…HERE

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