Sonkin: Quant crisis of August 2007 was driven by model uniformity
Paul Sonkin · Paul Johnson and Paul Sonkin – The Perfect Investment (Capital Allocators, EP.32) · Nov 27, 2017 · at 17:52
Paul Sonkin and Paul Johnson discuss market efficiency breakdowns, explaining how quantitative funds running similar algorithms eliminated cognitive diversity during the August 2007 quant quake.
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“We talk about the quant crisis of August of oh seven as a perfect example when you don't have diversity in the shareholder base. And that was what really caused it, is that you had so many quants that were using the same models, so there wasn't a lot of diversity.”
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