Stories Behind The Sharp Fall And Rise Of Global Stock Markets

In recent years, the sharp rise and fall of global stock markets has become the norm. First, the Chinese stock market soared before June, and then the Shanghai Composite Index plummeted from 5178 to 2850, a drop of 46%. The sudden devaluation of the RMB immediately triggered a huge shock in the global stock market, foreign exchange market and commodity market. Finally, the global stock market crash was triggered on August 21, with the US Dow Jones Index plummeting by 1879 points in six trading days. Then the two trading crystals recovered nearly 1000 points.

According to the data of private placement Paipai Network, since this year, the top five program trading futures private placement has achieved remarkable results, and the yield of one product of a futures private placement even exceeded 800%. Virtu, the world's top electronic trading company (whose main strategy is high-frequency trading), once wrote in its IPO prospectus that in 1238 trading days, only one day lost money. Public figures show that on Wall Street, the average annual yield of high-frequency trading companies exceeds 60%. In other words, with this kind of stylized trading, the financial market will be invincible.

However, in a zero sum game financial market, where does the profit of this inexhaustible stylized transaction come from? Why do they like the sharp rise and fall of the market? Why can the financial market rise and fall? This is what Chinese regulators and investors should pay close attention to.

The German stock market rose 1.7% and the French stock market rose 2.4% yesterday. Japan's Nikkei Index surged 7.7%, the Shanghai Composite Index rose 2.3%, Hong Kong's Hang Seng Index rose 4.1%, and Taiwan's stock market rose 3.57%. Singapore, Australia, South Korea and other stock markets soared. The stock market panic index dropped 8.15% yesterday to 22.87, which is close to the level before the stock market crash in August. Why have global stock markets soared and plummeted in recent months? In addition to the particularity of China and other countries, it may be more closely related to the current global stock market trading system and trading methods than to the economic situation or macro background of countries.

For the past explanation of stock market fluctuations, the general traditional theory believes that the stock market is a barometer of the real economy, which is largely related to macroeconomic changes. However, many economists later believed that the sharp fluctuations in the stock market were largely related to human irrational factors. Samuelson, an American economist, believed that, price of stock The fluctuation of is stronger than that of GDP. Therefore, the sharp decline of stock market prices does not necessarily mean that the real economy will decline, but more because of the emotional role of people. Because the stock market is inherently a volatile market, it is easy for irrational optimism to lead to bubbles in the stock market, and inexplicable pessimism has caused the stock market to plummet. The same is true of Keynes. Because investors in the stock market often rely on fantasy, emotion and luck.

But these traditional wisdom or views have little persuasive power to explain the reality. Modern developed European and American stock markets have undergone fundamental changes in their trading rules, trading methods, trading procedures, trading concepts and other aspects. At present, stylized trading is very popular in European and American stock markets. These stylized transactions accounted for more than 70% of the trading volume in the American stock market and more than 40% of the trading volume in the European stock market. In various financial derivatives markets, this stylized trading should be more prevalent. It only took more than 10 years for these new speculators to fully control the financial market.

Programmed trading generally refers to the process of generating buying and selling signals according to a certain trading model, and the computer automatically executes trading instructions, including algorithmic trading, quantitative trading, high-frequency trading and other trading forms. The advantages are mainly embodied in following the trend of operation to earn band profits; Simple instructions, clear strategies, and elimination of artificial greed; Improve transaction efficiency and enrich market liquidity. That is to say, the biggest characteristics of program trading are as follows.

The first is to completely eliminate the irrational and perceptual factors of traditional stock market trading decisions, and complete them by the rational logic deduction of the computer programs that have been designed, or completely Rationalization Therefore, the current stylized trading is quite different from the irrational factors that Samuelson and Keynes analyzed to control the volatility of the stock market.

Second, this stylized trading is not only extremely fast, it can easily incorporate more factors that may affect stock market volatility into the calculation model. That is to say, in the age of big data, this computer program can conduct high-speed search and incorporate all relevant information found that affects the rise and fall of the stock market into the calculation model. For example, if the climate change in a country as far away as Africa is related to the rise and fall of the stock market, the model can also take this factor into account. That is to say, the information of stock market trading decision-making is complete and the response is fast.

Third, this stylized trading can be carried out at the speed of light, which can completely surpass the human limit. Their algorithms constantly search for trading opportunities in the market automatically, capture trading profits in a few milliseconds, and operate the market with impunity. That is to say, this stylized transaction is completely possible to circumvent the existing regulatory system and methods. At present, global regulators do not know what happened to such transactions at all, and replace their scientific nature with the technical nature of financial transactions.

In other words, from the characteristics of modern program trading, any new market information is to change its trading price, trading mode Trading strategy These changes can be completed in an instant or without people feeling it. These market information can easily lead to positive or negative feedback of market price. That is, positive market information constantly pushes up the stock market, causing the stock market to soar; The negative information keeps pushing down the stock price, causing the stock market to plummet. This is true of the stock market, as well as other financial market stylized transactions such as the foreign exchange market and commodity market.

Therefore, the information of RMB depreciation can be understood as a negative factor of China's economy by the stylized transaction model, while the loose monetary policy of the Chinese government can be understood as a positive factor of the market. How can the global financial market not rise and fall sharply after such repetition? This is the fundamental reason why the current global financial market has plummeted. It is also the best profit conditions created by the sharp fall and rise of the financial market for these stylized transactions.