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Violent Reflexivity: Why Market Movements Are More Aggressive Than Ever, Feat. Corey Hoffstein

How the Fed and the rise of passive investing and volatility strategies have combined to make market movements faster and more severe.

By Nathaniel Whittemore
AccessTimeIconSep 23, 2020 at 7:00 p.m. UTC
Updated Sep 14, 2021 at 9:59 a.m. UTC
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How the Federal Reserve and the rise of passive investing and volatility strategies have combined to make market movements faster and more severe.

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This episode is sponsored by Crypto.com, Bitstamp and Nexo.io.

Corey Hoffstein is the founder and chief investment officer of Newfound Research LLC, a quantitative research and investment fund. He is also the host of the “Flirting with Models” podcast. 

His most recent research is “Liquidity Cascades: The Coordinated Risk of Uncoordinated Market Participants.” 

In it, he examines three popular narratives about what is driving radical swings in markets, including:

  • The increased role of the Federal Reserve
  • The rise of passive and index investing
  • The growth of volatility-correlated strategies 

He finds that, individually, none could explain the radical market shifts we’ve seen. However, when combined, they create a market incentive loop that is causing markets to move and react to exogenous shocks more quickly and aggressively than ever before. 

Find our guest online:
Twitter: @choffstein 
Website: Newfound Research

See also: The Decade of the Living Dead: How Zombie Companies Are Robbing Tomorrow’s Economy

For more episodes and free early access before our regular 3 p.m. Eastern time releases, subscribe with Apple Podcasts, Spotify, Pocketcasts, Google Podcasts, Castbox, Stitcher, RadioPublica, iHeartRadio or RSS.

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