Zooming In on Equity Factor Crowding
Valerio Volpati,
Michael Benzaquen (michael.benzaquen@polytechnique.edu),
Zoltán Eisler,
Iacopo Mastromatteo,
Bence Tóth and
Jean-Philippe Bouchaud (bouchaud@spec.saclay.cea.fr)
Additional contact information
Valerio Volpati: CEA - Commissariat à l'énergie atomique et aux énergies alternatives
Michael Benzaquen: LadHyX - Laboratoire d'hydrodynamique - X - École polytechnique - IP Paris - Institut Polytechnique de Paris - CNRS - Centre National de la Recherche Scientifique
Iacopo Mastromatteo: SISSA / ISAS - Scuola Internazionale Superiore di Studi Avanzati / International School for Advanced Studies
Jean-Philippe Bouchaud: CFM - Capital Fund Management - Capital Fund Management
Post-Print from HAL
Abstract:
Crowding is most likely an important factor in the deterioration of strategy performance, the increase of trading costs and the development of systemic risk. We study the imprints of crowding on both anonymous market data and a large database of metaorders from institutional investors in the U.S. equity market. We propose direct metrics of crowding that capture the presence of investors contemporaneously trading the same stock in the same direction by looking at fluctuations of the imbalances of trades executed on the market. We identify significant signs of crowding in well known equity signals, such as Fama-French factors and especially Momentum. We show that the rebalancing of a Momentum portfolio can explain between 1-2% of order flow, and that this percentage has been significantly increasing in recent years.
Keywords: crowding; equity factors; momentum; market microstructure (search for similar items in EconPapers)
Date: 2020
New Economics Papers: this item is included in nep-mst
Note: View the original document on HAL open archive server: https://hal.science/hal-02567503
References: Add references at CitEc
Citations: View citations in EconPapers (2)
Published in The Journal of Risk, 2020, November 2020
Downloads: (external link)
https://hal.science/hal-02567503/document (application/pdf)
Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
HTML/Text
Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-02567503
Access Statistics for this paper
More papers in Post-Print from HAL
Bibliographic data for series maintained by CCSD (hal@ccsd.cnrs.fr).