Oil price volatility could be a direct result of trend following /CTA fund activity, and trades by risk parity funds argues JP Morgan in its latest Flows & Liquidity global asset allocation research report.
The report, which is compiled by the bank’s global asset allocation research team headed by Nikolaos Panigirtzoglou, presents data showing over the past few weeks trend-following/CTA strategies have been switching from long stance two weeks ago to a short stance last week thanks to relatively small movements. Previous research conducted by the bank appears to support the conclusion that a 2% also move in oil prices could create frequent switching from long to short stance.
