Hedge funds are now the largest volume players in the capitalmarkets. They follow a wide assortment of strategies but theiractivities have replaced and overshadowed the traditional model ofthe long only portfolio manager. Many of the traditional technicalindicators and commonly accepted trading strategies have becomeobsolete or ineffective.
The focus throughout the book is to describe the principalinnovations that have been made within the equity markets over thelast several years and that have changed the ground rules fortrading activities. By understanding these changes the activetrader is far better equipped to profit in today's morecomplex and risky markets. Long/Short Market Dynamicsincludes:
* A completely new technique, Comparative Quantiles Analysis, foridentifying market turning points is introduced. It is based onstatistical techniques that can be used to recognize money flow andprice/momentum divergences that can provide substantial profitopportunities.
* Power laws, regime shifts, self-organized criticality, phasetransitions, network dynamics, econophysics, algorithmic tradingand other ideas from the science of complexity are examined. Allare described as concretely as possible and avoiding unnecessarymathematics and formalism.
* Alpha generation, portfolio construction, hedge ratios, andbeta neutral portfolios are illustrated with case studies andworked examples.
* Episodes of financial contagion are illustrated with a proposedexplanation of their origins within underlying market dynamics