"Trading Catalysts takes you into the market and recounts moment-by-moment price action. From an almost 14% rise in the Nasdaq following a surprise Fed rate cut to an incredible (and temporary) 22% decline in the S&P 500 futures price folliwng a single large sell order, Trading Catalysts is loaded witih real-life examples of how events move markets. Must reading for traders and investors alike." --Victor Canto, Pd.D., founder of La Jolla Economics and a columnist for The National Review
"At last...an invaluable investment book that shows in detail how markets actually behaved during extreme events, times when fortunes were won or lost in the blink of an eye. This is the real world of trading and risk, not academic theory. Read, learn and prepare yourself because these types of extraordinary events will happen again." --Peter Matthews, Managing Partner, Optimation Investment Management LLC
Understand the Triggers of Market Volatility—and Take Advantage of Them
In Trading Catalysts, Robert I. Webb examines the various factors that move markets. Webb focuses on the catalysts that spark the biggest price changes—and the greatest potential for substantial profits or losses. Using numerous real market examples, Webb demonstrates the often inconsistent response of prices to similar trading catalysts across markets and over time, the occasional significantly delayed response, and the frequent market overreaction. Whether traders bet directly on a trading catalyst, on the presumed market reaction (or overreaction) to it, or not at all, the potential impact on market prices and volatility means that all traders must pay attention to trading catalysts and the market reactions that they induce. At the very least, the prospect of significant volatility around some event may affect the timing of a trader’s entry or exit of positions and may cause a trader to reduce his position size. If you’re a serious trader, this book will help you understand the influence of trading catalysts and identify potential trading opportunities.
Volatile financial markets create both the risk of substantial losses and the opportunity for substantial gains. Sudden jumps or breaks in prices can impart a roller-coaster-ride-like quality to trading or investing in financial markets. Trading Catalysts is the first complete guide to the events that spark large changes in prices. These include: central bank actions; ill-advised comments by policymakers; news of natural disasters; elections; certain economic reports; terrorism; company specific announcements; the unwinding of large positions by key market participants; and simple trading errors among others. The varied origin of trading catalysts means that some traders may have an edge in anticipating the market’s reaction to certain trading catalysts. Numerous real market examples take the reader into the heart of the market to illustrate the direction, magnitude, speed, duration, intensity and breadthof influence of trading catalysts on market prices. Because a minute can be a “lifetime” in the world of trading, many of the detailed examples recount moment-by-moment and tick-by-tick changes in market prices. This book discusses the role that trading theses(or prevailing beliefs about market relationships), market conditions,and sentimentplay in determining how prices react and sometimes overreact to various trading catalysts over time. Trading Catalysts will help readers anticipate potential events that could spark rallies or breaks; predict situations with feedback loops that drive markets up or down; and identify situations where substantial overreactions are likely to occur.
Chapter 1: Introduction
Chapter 2: Market Conditions and Sentiment
Chapter 3: Talk Isn’t Cheap
Chapter 4: Geopolitical Events
Chapter 5: Weather and Natural Disasters
Chapter 6: Market Interventions
Chapter 7: Periodic Economic Reports
Chapter 8: Size Matters
Chapter 9: Bubbles, Crashes, Corners, and Market Crises
Chapter 10: The Accidental Catalyst
"Sinopsis" puede pertenecer a otra edición de este libro.
Robert I. Webb teaches Financial Trading at both the McIntire School of Commerce and the Darden Graduate School of Business Administration at the University of Virginia. His research focuses on derivative securities and markets, trading, and incentive economics. He is the author of Macroeconomic Information and Financial Trading(Oxford, 1994) and has written numerous academic papers. Webb has traded treasury bonds and other fixed income securities for the Investment Department of the World Bank; traded futures as a “local” on the floor of the Chicago Mercantile Exchange; designed new financial futures and option contracts for the Chicago Mercantile Exchange; served in the Executive Office of the President, Office of Management and Budget during President Reagan’s first term; and served at the Commodity Futures Trading Commission. He previously taught at the University of Southern California. Webb is editor of The Journal of Futures Markets, a leading academic journal on derivative securities and markets. He earned his Ph.D. in finance from the University of Chicago, and has published widely in both academic journals and the financial press.Excerpt. © Reprinted by permission. All rights reserved.:
This book owes its origin to my long fascination with the behavior of speculative prices, in general, and extreme market moves, in particular. My interest is driven by both intellectual curiosity about how news is incorporated into market prices and fascination with the potential for large gains or losses associated with trading around extreme market moves. This book is the culmination of many years of observing changes in financial market prices up close, as a trader, and at a distance, as a professor.
I was a doctoral student at the University of Chicago Graduate School of Business when the finance faculty included Fischer Black, Eugene Fama, Merton Miller, and Myron Scholes, among others; and the statistics faculty included Arnold Zellner—the brilliant Bayesian econometrician. Chicago was the birthplace of the efficient markets hypothesis—the notion that security prices fully and correctly reflect available information. However, the process by which new information was impounded into market prices was largely a black box. Although I was a student at Chicago during arguably the peak of the influence of the efficient markets hypothesis on academic research, the fundamental takeaway from my studies at Chicago was not the presumptive validity of market efficiency, or any other theory for that matter, but rather the importance of empiricism—that is, what do the data tell us? Indeed, the theory of market efficiency originated from seemingly puzzling observations by Maurice Kendall, Holbrook Working, and Harry Roberts that changes in speculative prices appeared to follow a random walk.
I was a newly minted Ph.D., and an assistant professor at the University of Southern California, when I watched silver and gold prices sometimes rise or fall sharply on a number of days during the autumn of 1979. Clearly, the movements were too large and volatile to be explained by the arrival of new information alone, as the efficient markets hypothesis would suggest. Equally clearly, the actions of certain traders played a key role in many of the price moves. This episode eroded my belief in the validity of the efficient markets hypothesis, but increased my curiosity over how news is impounded into speculative prices.1 It also led me to secure a two-year leave of absence from the University of Southern California and accept an appointment at the Commodity Futures Trading Commission in Washington, D.C. in 1980.
At the time, the Commodity Futures Trading Commission was a relatively new Federal Agency, having been created in 1974. Not surprisingly, the then-recent attempted "silver corner" was a common topic of conversation among Commission staffers as were other issues related to market surveillance. My work at the Commission gave me an opportunity to see raw news as it was reported. The Commission had a teletype machine that received news bulletins. The machine was located in a hallway closet next to the water fountain. I would stop by several times a day to read the latest news off the wires. I quickly recognized the important role that news editors play as I sorted through mounds of fluff for the occasional nugget of news. However, even bona fide news did not always seem to have the predicted impact on market prices.
My career took a slight detour when I was offered an opportunity to serve in the Executive Office of the President, Office of Management and Budget (OMB) in 1981. My boss at OMB was Larry Kudlow. The emphasis on domestic economic policy during President Reagan's first term meant that OMB was the place to be in the Reagan Administration at the time—until OMB Director David Stockman was "taken to the woodshed" by the White House for some ill-advised comments.
When my two-year leave of absence was up at USC in 1982, I chose to enter the private sector and accepted a position as Senior Financial Economist at the Chicago Mercantile Exchange (CME), where I helped design new financial futures and option contracts. It was an exciting time to be at the CME as stock index futures contracts had only been introduced in April 1982, just months before I arrived. Working at the CME also afforded me the opportunity to observe the open outcry system on a daily basis from the vantage point of the exchange floor. The only thing that I was precluded from doing was entering the trading pits themselves—that was reserved for CME members (i.e., seat holders) and CME pit reporters. Active days were especially exciting to watch and I availed myself of every opportunity to do so. Although I was closer to the market, I was not closer to understanding how news is impounded into market prices. I left my position as an employee of the CME in 1983 and became a member of the Index and Options Market division of the CME. I was inside the "black box" at last. Finally, I hoped to get an answer to my question of how news is impounded into market prices.
An open outcry futures trading pit provides an unusually good vantage point from which to view the determination of market prices because a large fraction of total trades in an open outcry environment are between locals. Life as a "local" was fast-paced and exciting on active days, boring on tranquil days, but always intellectually challenging. I quickly found that many of the preconceptions I had about how speculative prices should behave were wrong. My advanced training in finance was initially a disadvantage in the pit because it made me intellectually rigid rather than flexible and open to new ideas. Some intellectual baggage was discarded. At the same time, my training at Chicago also helped me discover many potentially profitable trades. I saw firsthand the wide range of factors that could impact market prices in the short run.
In 1986, I returned to academia when I accepted a position at the University of Virginia. Almost immediately upon my arrival, I was approached by the World Bank. At the conclusion of my first academic year at Virginia, I took a 15-month leave of absence to work in the Investment Department at the World Bank in May of 1987. At the time, the Investment Department was an active trader in fixed income markets—trading almost as much as a primary government securities dealer. The Investment Department managed a liquidity portfolio of about $19 billion to $22 billion, depending upon whether International Development Association and International Finance Corporation funds were included. (The purpose of the liquidity portfolio is to allow the Bank to continue to perform its principal function of lending to developing countries in the event of a financial crisis.) These monies were invested in high-grade sovereign securities. Befitting its status and its immense trading volume, the World Bank had direct telephone lines to the major investment and commercial banks. I rotated around the trading desk. My experience trading on the floor of the CME proved to be immensely valuable when I traded fixed income securities for the World Bank.
However, the experience of trading in the Investment Department of the World Bank also presented me with a new set of anomalies to think about. One group of these anomalies—the often puzzling reactions of fixed income prices to scheduled economic reports—inspired my book Macroeconomic Information and Financial Trading (Blackwell, 1994). I was fortunate to be on the trading floor during the stock market crash of Monday, October 19, 1987 where I observed the limited (and initially negative) reaction of the U.S. Treasury bond market to the crash. A few hours after the U.S. stock market closed, however, Treasury bonds scored their largest one-day rally ever in a delayed reaction to the stock market crash.
After my leave of absence was up, I returned to the University of Virginia. In addition to writing articles for academic journals, I wrote a number of opinion pieces for various publications including The Wall Street Journal, the Nihon Keizai Shimbun, the Nikkei Weekly, and Investors Business Daily. In 1994, at the request of students, I started teaching a course on Financial Trading at both the McIntire School of Commerce and the Darden Graduate School of Business Administration at the University of Virginia. One of my former students, Andrew Peskin, was a particular help to me in that regard. A number of prominent traders, fund managers, and fund of fund managers have lectured to students in the course over the years including Arki Busson, John Henry, Paul Tudor Jones II, Peter Matthews, Drew Millstein, R. Jerry Parker, and Jeff Yass, among others. The comments of many of these speakers on the issues of the day have also influenced my views on the behavior of speculative prices. In 1998, I was appointed editor of the Journal of Futures Markets—a leading academic journal on derivative securities and markets. The Journal of Futures Markets has had two special issues on trading during my editorship.
This book has benefited from many conversations that I have had over the years with Hesham El-Naggar, Rick Gerson, Richard Jaycobs, Gary Schirr, Paul Staneski, and Jules Staniewicz on a whole host of financial topics. I would also like to thank Victor Canto and Richard Leonard for their steadfast encouragement to write this book. A special note of thanks is due to Jim Boyd, Executive Editor at FT Press, and to Melody Koh for her research assistance in producing the various figures included in this book.
Finally, I would like to thank my wife, Mary Beth, my three children, Alexander, Elizabeth, and Diana, as well as members of my immediate family, for the patience, love, and encouragement that they showed me while I was writing this book.
Robert I. Webb
1 That said, the concept of informational market efficiency is a useful benchmark by which to measure the value of private information and assess whether there are any hidden risks as...
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Descripción Pearson Financial Times, 2006. Gebundene Ausgabe. Estado de conservación: Neu. Unbenutzte Restauflage Unbenutzt. Schnelle Lieferung, Kartonverpackung. Abzugsfähige Rechnung. Bei Mehrfachbestellung werden die Versandkosten anteilig erstattet. - In Trading Catalysts, Robert I. Webb examines the various factors that move markets. Webb focuses on the catalysts that spark the biggest price changes-and the greatest potential for substantial profits or losses. Using numerous real market examples, Webb demonstrates the often inconsistent response of prices to similar trading catalysts across markets and over time, the occasional significantly delayed response, and the frequent market overreaction. Whether traders bet directly on a trading catalyst, on the presumed market reaction (or overreaction) to it, or not at all, the potential impact on market prices and volatility means that all traders must pay attention to trading catalysts and the market reactions that they induce. At the very least, the prospect of significant volatility around some event may affect the timing of a trader's entry or exit of positions and may cause a trader to reduce his position size. 336 pp. Englisch. Nº de ref. de la librería INF1000035950
Descripción FT Press, 2006. Hardcover. Estado de conservación: New. 1. Nº de ref. de la librería DADAX0130385565
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