Which sounds initially complicated, is actually based on a simple method. Basis of SAR basically as efficiently estimated, highly liquid U.S. stock market, which usually leads to very fair pricing of shares. Exceptions typically occur through short-term influences. It can be rumors, the announcement of the new information, or, for example, the liquidation of large positions by a market participant that can lead to larger rear setters with single title replay.
Caused such price movements, you can triggered stop-loss orders in the order books of exchanges that further inflame a negative price movement. In extreme cases, there is a domino effect followed by more fear-driven sales there is an exaggeration. SAR occurs in such stages with limit orders as Buyer on when a level significant for the company has fallen below an exaggeration of shares thus providing liquidity, when she most needed. As an example, SAR refers to a typical trade Setup on April 25, 2012. On this day the shares Juniper Networks Inc. (JNPR-NYSE) at a price of us $ 20 was bought after the stock during the course of the day to over 7% had lost their value.
The position was sold just a few hours later by SAR with a profit of more than 3% to 20.75 USD. In this type of trade, it is expected that the courses again approaching its long-term average price after an exaggeration. This is called mean-reversion effect. Strategies that rely on such intervention, have a very positive effect on the price of a stock generally. They reduce the volatility and thus at the same time lead to a stabilization of the market. Title usually at very favourable conditions can be acquired in return. Amadeo liquid Equity Alpha managed account 3 x comes out completely without discretionary component. Purchase decisions are implemented purely quantitatively. Therefore, in this case, one speaks of a quantitative mean-reversion strategy.