This Could Be the Trigger for Market Mayhem

by Matt Turner
Business Insider

The stock market went haywire about a year ago.

The Dow crashed more than 1,000 points, the S&P 500 was down 120 points, and the Nasdaq was down 393 points shortly after the market open on August 24.

And for a time, the blame for the sudden and unexplained move was a group of funds called risk parity funds.

Risk parity funds build portfolios around risks: They target a certain exposure to volatility, rather than, say, equities or bonds. That means that when volatility spikes, they sell automatically and indiscriminately.

Continue Reading at…