The turn of the millennium was one of the craziest times in the history of stock markets. Of course, everyone knows about the "dot-com" companies with P/E ratios in the stratosphere. Fewer people understand how the "Y2K bug" forced so much spending on tech that it drove up valuations towards the end of the 90s (and the Fed helped by pumping money). But almost nobody talks about how the market changed . The best example of that change is this chart showing the 1-day autocorrelation of the S&P 500: It's pretty easy to see the regime change there. After a half-century of positive autocorrelation, the market flipped to negative autocorrelation. Why did this change happen? Nobody knows, but it probably wasn't just one thing. I think it probably had something to do with shrinking trading costs, faster transmission of ideas, and increased reliance on automated trading systems. Regardless of why this change happened, I just want know how it affects trading st...
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