Letters
From Robert Macrae of Arcus Investment
Under Fire: Do Hedge Funds Cause Volatility?
Commentators often assert that hedge funds cause volatility, but a simple thought experiment suggests that this is unlikely.
Imagine a traded security that has unpredictable returns, with the exception that we are a major trader and can transact sufficient volume to move prices in the short term. How should we trade in order to make returns as volatile as possible?
The best we can do is to buy and sell it in short
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