Point Focal Market Behavior Risk Management provides critical market structure behavior information to institutional equity asset managers. The state of market behavior demand, supply, and equilibrium for indexes, portfolios, sectors, and stocks are automatically and dynamically mapped to uploaded holdings. Derived market behavior analytics are used to improve program trade economics, capitalizing on trading opportunities while mitigating potential downside risks.
Market participant activity is classified into four key behaviors:
1. Fast Trading. The pursuit of price as the objective. Investment horizons of a day or less. (53% of S&P 500 volume)
2. Passive Investment. Characteristics as purpose. Indexes, ETFs, quants. (20% of volume)
3. Risk Management. Volatility or taking and managing risk as motivation. (17% of volume)
4. Active Investment. Story as purpose. Classic bottom-up value, growth, investing. (10% of volume)
Demand is an algorithm calculated by modeling behaviors discretely and measuring contribution to average prices on a 10-point scale. Supply is the percentage of daily trading representing borrowed or created stock as measured by FINRA short volume data.
Equilibrium is a neutral state where current demand and supply meet historical reference points. Divergences reflect demand and supply moving away from equilibrium. Convergences reflect demand and supply moving towards equilibrium. Amplitude is a security’s distance from equilibrium.
Market behavior demand supply quadrants classify demand supply characteristics into four categories: strength, weakness, muted-upside, muted-downside.