To: Boca_PETE who wrote (5350 ) 5/25/1999 10:08:00 AM From: Sun Tzu Read Replies (1) | Respond to
Thanks for suggestion of the book. I will put it in my books-to-read list. The 90% number may have been true at some point (though I doubt that), but the nature of the market has changed very rapidly as of late. The quote you are refering to was probably written in '95 and was never edited out. In those times, D.E. Shaw alone was responsible for 20% of NYSE volume on some days [D.E. Shaw is a private hedge fund manager with emphasis on quantitative arbitrage methods]. He, along wih many other hedge funds, has suffered greatly during '97 and '98 and was forced to sell assets [read defaulted in his debt]. What is more, index funds are a lot more popular now than they were in '80s and early '90s for the same reasons that Mr. Ellis names. By its nature, passive money management generates very little trades. So many forces of institutional trade volume are no longer present in full force. In addition, I work on Wall Street (sorry don't want to name the firm, but it is one of the top 4) and our internal research shows that since this February there has been a noticeable shift towards do-it-yourself money management. I can also offer you some anecdotal evidence such as flat to negative flow of funds into mutual funds while the market has rallied; the recent out performance of Russell 2000 versus SPX [where institutional money duels]; popularity of index funds, focus funds (like janus 20/20), sector funds, and 2-Beta funds (all which generate very little trades).
