Liquidity Cascades with Corey Hoffstein
Excess ReturnsOctober 11, 202000:57:18

Liquidity Cascades with Corey Hoffstein

It has been said that the most dangerous words in investing are "this time is different". But sometimes a confluence of factors come together to significantly change the character of the market. In the best research paper we have read this year, Corey Hoffstein argues this could be one of those times. In this interview, we go through all the details of Corey's argument and how they fit together to form a very compelling argument that this time might in fact be different.

We discuss:
Why the "moneyness" of markets has greatly increased the interdependence between the stock market and the economy;
Why the rise of divergent investment strategies has increased market volatility;
The role of the Federal Reserve policy in driving investors up the risk curve;
How passive investing has impacted the market overall and the relative pricing of stocks within it;
The role of options dealers and how options buying and selling can exacerbate volatility.

LIQUIDITY CASCADES PAPER
https://blog.thinknewfound.com/2020/09/liquidity-cascades-the-coordinated-risk-of-uncoordinated-market-participants/

MORE INFO ON NEWFOUND RESEARCH
https://www.thinknewfound.com/

FOLLOW COREY ON TWITTER
https://twitter.com/choffstein

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Justin Carbonneau, Corey Hoffstein, Interest Rates, Excess Returns Podcast, Passive Investing, Liquidity Cascades, Risk Taking, Jack Forehand, Options, Federal Reserve, Chasing Yield, Market Incentive Loop,