Top economist says it’s ‘panic season’ in markets and it’s your fault for taking summer vacation. Blame the ‘harvest time’ mentality

Lamont, a prominent economist in the quantitative hedge fund of $ 150 billion, was a faculty member at Harvard University, Yale College of Management, and the College of Business for Business at the University of Chicago, and the University of Princeton, back in financial history, and found an amazing style. “Even if the systematic stocks are not your thing,” he wrote on his academic blog, Owenomics, “You should be mentally ready for an epic financial disaster during the next three months.”

His research draws a direct line between the timing of many of the most destroyed financial crises and centuries -old: market accidents tend to gather during the so -called “harvest time”, which runs from August to October.

Historical style

“For practitioners filled with systematic stock strategies,” Lamont writes, “August is the most harsh month.” He threw his mind to the “quantum earthquake” in August 2007, where he wrote that analysts have since spent August “examined our phones compulsory and have nightmares about screens full of incandescent red numbers.”

When it was reached to comment before The intelligence of luckLamont said he was calling from the same house in Maine, where he was screaming during the 2007 quantitative accident. Every year, he added that panic was “definitely in my mind”, as is the case for any stock managers of an amount of more than 50 years old.

Although it overwhelmed the beginning of the great financial crisis in September 2008, Lamont wrote that the quantum accident was classic appropriate, as it occurs during a sleeping period of time in the markets when liquidity is thin because many traders move away from their offices. Lamont is cited the modern research that shows that August and September are periods of liquidity that is unusually low, as investors and market makers make summer vacations in the northern hemisphere. Decreased market liquidity means a lower ability to absorb large sudden trading – a recipe for huge fluctuations if the crisis erupted.

Looking at the past fifty years, Lamont emphasizes the fact that most of the major American market crises have been struck between August and October, when the markets were swollen shock insomnia. Among the historical collapses in the market during these months, the collapse of the capital management was in the long term and the bankruptcy of Lehman Barrazz for the year 2008-two in October-1987 of black from the black stock market, and the 1997 Asian financial crisis. But it is due to the establishment of the United States itself, sees a similar pattern.

The deep roots of the harvest

Lamont wrote that the first bubble in America, “Scriptomania”, occurred in July 1791, and panic occurred in 1857 and 1873 in August and September, respectively. Then panic for 1907 is followed in October.

The perpetrator is clear to the Eamont: the summer vacation. However, in discussing chicken or eggs, it argues that the American agricultural economy has created the need for a summer vacation, as was the case when the harvest and money needed to flow from the cities of the Great Eastern Coast and to the western agricultural areas.

Lamont was martyred in the diagnoses of Oliver Mitchell Wintworth Spring for the “panic season” in 1910 History of crises within the framework of the national banking system: “With a few exceptions, all our crises, panic, and periods of less intense cash apostasy, occurred in the fall when Western banks were, by selling grain crops, in a position that could withdraw large sums of money from the east.“ This pattern was monitored until 1884 by English economist William Stanley Javs. Lamont adds, citing 1986, that the establishment of the American Federal Reserve itself was part of a reaction to such panic. American economic review Essay by Jeffrey Mirun.

“If you do rough mathematics, there is a 10 % chance in an epic disaster between August and October this year, and only 2 % of November to July,” investors warn of “mentally prepared” for the huge risks in the next quarter.

Lamont said The intelligence of luck He is not particularly concerned about the upcoming panic season compared to anything else. He said that the collapse of the market is still a “rare event”, adding that no players are particularly dominant in the market that could cause crash. But again, he added that he was not aware of anything in August 2007 when the quantity occurred.

The time of the distant harvest?

Lamont agreed luckA comparison between the thesis of the harvesting/panic season to “flash accidents”, which often occurs overnight, after trading in America ends and before you start in Asia. He said this is a severe vacation in a non -liquid market, “as what will happen if everyone is asleep.” He repeated his belief that “strange things happen” in non -liquid markets. Then it became philosophical on how to ask all economics to have a kind of appetite for strangeness.

What about Europe, which traditionally takes much longer vacation in August, and sometimes the entire month, compared to Americans and their most conservative policy? Lamont agreed, but he indicated that with America as a global financial center in the world, with a much larger market, the impact of insomnia feels more strong. He pointed out that other academics have covered a seasonal in other countries, such as Australia, where it appears to be the opposite state, or the effect of seasonal influence disorder on trading in the northern countries.

In the end, he said luckThe benefits of the current system outperform the risks. He said that the “traditional and heavy approach” will be to close the market, and trading will start in August completely.

Lamont said luck From his upbringing in two schools for the economy that revolve around the heavy and lighter organization, with the imitation of the “salty water” of the eastern coast that he learned at the Massachusetts Institute of Makni and said: “The principle of the basic economy is that you must allow people to circulate,” adding that he also believes in behavioral financing, which we wear that “people spoil and subject the markets.” He added that governments are making mistakes as well.

He added that the entire case may be resolved over time due to the emergence of work. “One of the theories is that because at the present time, we can all work far, the holidays are less effective on [trading] He said: Lamont said that he was working away from his home at Maine at the time, a week before his planned vacation at the same site.

At the present time, he added, we are trapped in the paradox of the traditions that started with our agricultural economy. People take a vacation in August because this is the time when people take leave. He said: “Especially with family gatherings, you want to be on vacation at the same time on your relatives’ vacation.” How is this for behavioral financing?

For this story, luck The artificial intelligence is used to help with a preliminary draft. Check an editor of the accuracy of the information before publishing.