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Research

Outlook - 2022

As 2021 draws to a close we are 12 years into a bull market, driven by falling interest rates to historically low levels which are reversing. What is the outlook for equities markets in 2022.

The energy crisis from China to South America to Europe is only set to worsen as we head into winter. What has created this? Global warming, emissions targets, lack of foresight for the transition from fossil fuels? However, it is now feeding into inflation.

Algorithmic Trading Explained

The increase in the speed of information dissemination means that share prices adjust rapidly, so the ability to capitalise on information asymmetry has fallen such that he who has the ability to analysis information quickly and execute a trade the fastest benefits the most. Algorithmic trading refers to the practice of using computers to place trades automatically according to defined criteria contained within the software's programming code, systemising the trading process, speeding up the stock selection and execution process, whilst removing emotion of the stock selection and execution process. 

Securities Pricing and Analysis Techniques

The pricing of securities falls into two different methodologies, fundamental and technical analysis.

  • Fundamental analysis involves the analysis of a combination of quantitative and qualitative information. This type of analysis is subjective in nature as each investor will determine different values using the same information.
  • Technical analysis focuses on statistical and behavioural analysis but assumes that markets are efficient

 Both types of investment strategies are focused on identifying investment opportunities and predicting the direction of security prices. 

Artificial Intelligence and Stock Selection

There is a significant amount of discussion and research dedicated to utilising artificial intelligence to predict the movement in stock prices. The main focus has been if artificial intelligence is able to be used to generate alpha. 

Simply put, artificial intelligence takes algorithmic trading strategies to the next level. It relies on analysing historical information to train the system to then predict future prices. It uses the historical information, or training data, to continually update the trading algorithm.

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