Quant funds get squashed

An article in The Wall Street Journal, "Blind to Trend, 'Quant' Funds Pay Heavy Price," August 9, 2007, describes what happens when trading driven by computer models hits a new “improbable” trend. The fact that these funds tend to travel in herds could make their operations destabilizing to the overall market. With “funds of hedge funds” using leverage liberally, the stock and bonds markets are becoming a treacherous place right now. And what happens when all the on-line traders using similar strategies hit “enter” at the same time?