PREDATORY TRADING AND CROWDED EXITS: New thinking on market volatility - Softcover

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James Clunie is Head of Strategy, Absolute Return at Jupiter Asset Management and manages the Jupiter Absolute Return Fund (Unit Trust) as well as the Jupiter Global Absolute Return fund (SICAV). Before joining Jupiter, James worked at Scottish Widows Investment Partnership as an Investment Director of equities, and managed a long/short equity fund and UK long-only funds. James was a senior lecturer in nance at the University of Edinburgh between 2003 and 2007, prior to which he worked as Head of Global Equities at Aberdeen Asset Management and Director and Head of Asset Allocation at Murray Johnstone International.

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In this book, the author looks at a series of market phenomena that involve security prices moving temporarily away from their 'fair value', creating opportunities for traders to profit (and the risk of losses for the unaware!). The phenomena he examines have only recently begun to be well understood. They include 'predatory trading' and 'crowded exits'. He examines these on three levels: Firstly, he describes the basic principles and theory behind each phenomenon, to build a solid framework for the way a trader should think of these situations. Secondly, he examines the accumulated 'empirical' evidence on these situations. This gives an idea of what generally happens in these situations, and what the profit opportunity and the risks might be like. Finally, the author considers a number of individual cases to illustrate what can happen to traders in practice. Often, these will be special situations or extreme events from history, but always cases from which the trader can learn.

By understanding these phenomena thoroughly in this way, a trader could gain an 'edge' over others in the market. In the first instance, this is achieved by avoiding becoming the victim of the phenomena the author describes. Secondly, it might be possible to use detailed knowledge of some of these situations to (legally and ethically) profit from the events.

This book will be of interest to traders seeking to gain an 'edge' through a superior understanding of how markets work, both in theory and in practice. It will also be of interest to longer-horizon investors who are seeking to avoid timing errors, and to risk managers seeking to understand better the subtleties of risk beyond traditional riskstatistics. Finally, academics and students of markets will find this work stimulating and thought provoking.