Anomaly in the financial markets


The anomalies in the financial markets are atypical behavior of the prices produced, either by unknown and accessible information, or by inaccessible information used incorrectly.

Financial markets are full of anomalies that are very difficult to predict and / or find, since they are driven by a multitude of variables based on expectations that make the price of a financial asset difficult to analyze. They are associated with the non-existence of market efficiency, especially efficiency classified as strong, where it is impossible to obtain market returns.

There are important asymmetries of information between each of the agents that intervene in these, and that is the key to all the movements that occur in the valuation of a good or service. In many cases, they are very difficult to justify since there are corporate movements of large sums of money that coincide with the existence of conflicts of interest between companies.

The power of information and statistical anomalies

As they say, whoever has the information has the power. Unfortunately, many of the players in the market do not have information, access to adequate technology or sufficient training, and thus lose important opportunities that ultimately result in the loss of money.

Since approximately 2010 there have been fewer entry barriers to these markets since the publicity is very high and investors can open an account almost anywhere in the world, activating a stock exchange operation through a click of the mouse. Although it is true that the internet communications of the countries and the servers where the information is hosted are not the same, and this can generate important differences in the quality of the executions.

Thus, if a price server is close to the computers where the world exchanges are located, access to prices will be faster because the information will be closer and it will take less time to be received. An investor who works with a broker that operates in the US that has its servers in Spain will not be the same as another investor that works in the US with a broker that has its servers in New York. This, however, is especially important in high-frequency operations, but hardly in the rest.

On the other hand, another type of anomaly not related to the misuse of information and that is cited in our definition, are statistical, fundamental or macroeconomic anomalies. It is from these anomalies that actively managed fund managers try to make a profit. They buy assets that they consider to be undervalued and when they are at a fair price, they sell them. On the other hand, there are also statistical anomalies on assets that for some reason maintain a strong relationship. Arbitrage techniques allow you to take advantage of these anomalies in the markets.

Examples of anomalies in the financial market

For example, we can mention how investment companies pay rating agencies with the power of influence to overweight the price of their company or how market makers manipulate the price of a financial asset with little liquidity by introducing an additional spread over the price. with greater demand or greater supply.

In addition, there is a lot of misleading advertising about certain financial products as well as recommendations from experts or investment companies without any experience or reputation, in order to influence the investor's investment decision to induce their purchase or sale.

We can also talk about synthetic or invented products created by issuers such as warrants or CFDs in unregulated markets where there is no transparency in the formation of prices where they function as the counterpart. In turn, it is very common to use the mass media to use personalities of great global influence to distort the operation of prices, such as the frequent appearances in Bloomberg of George Soros or Carl Icahn speaking in favor of certain companies where they have the power of influence or the comments of the presidents of the great world institutions such as the ECB or the Fed. Finally, we can mention the insurance created artificially against the non-payment of countries or companies known as CDS (Credit Default Swaps).

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