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But his is the magic, so claimed, of big data. All those idiosyncrasies cancel themselves out. ''you'' night not like rice pudding, or regularly buy [[lentil convexity|lentils]], but over a whole population a fairly reliable proportion of the population does. | But his is the magic, so claimed, of big data. All those idiosyncrasies cancel themselves out. ''you'' night not like rice pudding, or regularly buy [[lentil convexity|lentils]], but over a whole population a fairly reliable proportion of the population does. | ||
Our | Our agency and our idiosyncrasies average out. We all want to eat, be warm and dry and have rewarding careers. That we all do about this in subtly different ways doesn't much matter. Until it does | ||
For there is a ''third'' order of dissimilarities. In times of stress in the market the behaviour of other people in the market ''directly'' and ''directionally'' affects your transaction, and yours affects others. | |||
When the planet has suddenly gone into total lockdown as a result of an unexpected global pandemic, buying habits for toilet paper and, oddly, lentils, suddenly ''change''. The fact that there is only three tins of lentils left on the shelf leads you to grab them. The fact that there are none leads to a nation wide run on tinned pulses people don't, in normal times, much like. | |||
This is not just the crowded theatre phenomenon, when everyone stampedes for the exits at once, and the narrow aperture makes the stampede all the more urgent, and therefore dramatic — but second order features. An investor long “on margin” might wish to, and be able to, ride out a short term crash by meeting margin calls. In most dislocations this is the obvious and — if you can manage it, correct — thing to do. The market usually recovers, at least in the short term. But meeting your margin call means drawing on your revolving credit facility and your bank is experiencing a liquidity crisis and unexpectedly pulls you lines, or suspends withdrawals, as a result of its ''own'' market exposure to the crash. Your prime broker, usually patient with you and tolerant of peripheral looseness in your margin operations, is also under pressure, has told you today there is no flex, and for good measure, it is jacking up your IM. | This is not just the crowded theatre phenomenon, when everyone stampedes for the exits at once, and the narrow aperture makes the stampede all the more urgent, and therefore dramatic — but second order features. An investor long “on margin” might wish to, and be able to, ride out a short term crash by meeting margin calls. In most dislocations this is the obvious and — if you can manage it, correct — thing to do. The market usually recovers, at least in the short term. But meeting your margin call means drawing on your revolving credit facility and your bank is experiencing a liquidity crisis and unexpectedly pulls you lines, or suspends withdrawals, as a result of its ''own'' market exposure to the crash. Your prime broker, usually patient with you and tolerant of peripheral looseness in your margin operations, is also under pressure, has told you today there is no flex, and for good measure, it is jacking up your IM. | ||