possible final verdict on chronic vs acute

So I’m about to move and already boxed up my materials and am to lazy to go digging, but I did a search for “acute” on CFAI website and came up with this: http://www.cfainstitute.org/cfaprog/resources/pdf/Level_III_Errata.pdf do ctrl f- “acute” and it notes: Study Session 3, Reading 13:…In the solution to 2 (p. A-2), C remains correct. The first comment is incorrect because trading risk is a chronic inefficiency that can persist and be hard to exploit. The second comment is correct because it exploits an acute inefficiency, mispricing based on fundamentals. …this does not answer our discussion but if someone still has the materials accessible it might be worth checking what the question was just in case its similar to the exam. now- if there is an exam Q that ppl misinterpret bc of material errata I think its bogus, but again- I have not read the problem.

i don’t know why this is still up in the air. chronic = hedge funds. acute = day traders. therefore, acute trades 100x more than chronic. its ridiculous to not understand this. i used to be a scalper. i made 300 trades a day on the same stock in order to capitalize on acute ineffeciencies. show me one hf that trades the same stock 300 times a day to take advantage of a LT/chronic inefficency. chronic = long holding period, acute = extremely short holding period.

man if cfa uses an errata question they are hitting an all time low

I agree with you 100% but others have had some valid points citing the text directly. There are multiple instances where there are logical and widely accepted theories that contadict with CFAI- but this is an exam written by them. But than again- my interp of the schweser materials confirms acute too- I did not read CFAI text though so I’m more than happy reasoning it out with those who did (and believe it said chronic).

i only use cfai text and the definitions given easily lead to the conclusion that acute = st, quick trades.

and since they pit “mispricing based on fundamentals” in the acute arena than I think CFAI would say high frequency = acute too. That just makes so much more sense. I would venture to say that a majority of trading is based on mngr’s belief in “mispricing based on fundamentals”. The fact that the question asked for the higher frequency and not more popular strategy only confirms it more IMHO- but I wanted to put this out there bc depending on the question it is referring to it may clear this discussion up once and for all.

this aint the real world if you want to tell me the first comment on float is correct i could argue till the sun goes down

nothin but love for ya Jscott24 :)- but I’m just trying to pass this thing- LOL!! There are a bunch of debatable “facts” in the program- but the CFAI way is the right way on the exam. Once I have those 3 letters after my name I’ll become a contarian :slight_smile: btw- whenever I see you post I can’t help but humm “A Long Walk”

MattLikesAnalysis Wrote: ------------------------------------------------------- > i don’t know why this is still up in the air. > chronic = hedge funds. acute = day traders. > therefore, acute trades 100x more than chronic. > > its ridiculous to not understand this. i used to > be a scalper. i made 300 trades a day on the same > stock in order to capitalize on acute > ineffeciencies. show me one hf that trades the > same stock 300 times a day to take advantage of a > LT/chronic inefficency. chronic = long holding > period, acute = extremely short holding period. there is nothing up in the air, they are fooling themselves

Hey! I always said it was acute- I thought it was a gimme- but it wouldn’t be the first time I’ve been sucker punched by the institute

I thought it was acute. I am not trying to fool anyone. It is 3 points out of 360. They can have it, frankly. I was just confused, so I opened the book and that confused me more, so I posted the direct passages. No where in the book does it say acute results in day trading. No where. No where does it say that acute opportunities are everywhere. Those visible omissions stumped me. If you are going to trade 300 acute inefficiencies a day you need 300 arbs to trade. It clearly stated that acutes are easy to identify, that they can be easily arbed to eliminate uncertainty and that few market participants attempt to trade them. An example would remove my persistent doubts planted by the text. Can someone firmly in the acute camp provide an easily identifiable acute inefficiency today that you can trade 300x before 4:00?

slouiscar Wrote: ------------------------------------------------------- > Can someone firmly in the acute camp provide an > easily identifiable acute inefficiency today that > you can trade 300x before 4:00? Bankin’s bet of any money that I am going to pass? : )

slouiscar Wrote: ------------------------------------------------------- > I thought it was acute. I am not trying to fool > anyone. It is 3 points out of 360. They can have > it, frankly. I was just confused, so I opened > the book and that confused me more, so I posted > the direct passages. No where in the book does it > say acute results in day trading. No where. No > where does it say that acute opportunities are > everywhere. Those visible omissions stumped me. > If you are going to trade 300 acute inefficiencies > a day you need 300 arbs to trade. It clearly > stated that acutes are easy to identify, that they > can be easily arbed to eliminate uncertainty and > that few market participants attempt to trade > them. > > An example would remove my persistent doubts > planted by the text. > > Can someone firmly in the acute camp provide an > easily identifiable acute inefficiency today that > you can trade 300x before 4:00? depending on your fx rates and commissions you could probably pull off 300 trades on interlisted stocks before the end of day day. TD bank in canada = 57.64 * 0.904 (xrate) = 52.11 TD bank in the us = 52.45 commissions in day trading are zero and you get to amplify by 4x in equities and 100x in fx. so depending on your fx rates, you could find inefficiencies like this and possibly wider throughout the day all day.

haha. see fx is now .9086 to correct for that inefficiency. bam theres a few hundred trades in a matter of seconds.

^^the humans are not trading acute inefficiencies anymore… actually zero hedge has been running a great story on goldman’s program trading in nyse.

while your on zerohedge, check out the angry man video…“when’s this guy o n cnbc” or something like that.

thank you. …the fx bid/ask was .9080 .9091. But that aside, I do not have an account that can trade that fast or with zero commissions. That fraction of a % gain would more than disappear removing any incentive to trade even if I could get it off before the market maker moved the midpoint a minute later. So to that my follow up question would be: How do we know that it was “bam, a few hundred trades” that moved the fx from .904 to .9086 between 2:34 and 2:36. I mean isn’t it likely that one computer trade went off and that moved the midpoint to parity? bam one trade? Of course your example makes perfect sense. You certainly know more about that than I would having been a scalper. I just don’t run across many successful day traders let alone any that made their fortune going long on the Toronto and short on the NYSE.

this isn’t scalping- its maintaining efficient markets and there are multiple firms that I know of that make plenty of money in these basically riskless strategies. Margins are tight but thats where compounding comes in. Thousands of trades a day- all electronic- all net 0 EOD. Just google it :slight_smile:

I said acute trades more often because acute differences are traded away “quickly”…if that’s the case acute cases would see that many more trades.

^^Mike said he used to do be a scalper that made 300 trades a day on a single stock related to acute arb stuff. That’s all I meant. Anyway, thanks guys. This is what you expect. Countless arb opportunities, lots of trades. Why no mention in the book? One line clears all that up in seconds. …something like acute inefficiencies are abundant, easily identified, risks can be hedged away and the end result is significant trading activity. Nothing, nowhere. All they said repeatedly is how the majority of hedge funds, investors and invest-able assets spend time seeking to generate alpha using chronic inefficiencies. and worse yet that pursuing acute is “futile”. made no sense.