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A bit of S&P 500 Trivia: What lasts for 11 seconds?

70% of stock purchase of S&P 500 companies are held for 11 seconds 120 seconds or less.  The implication of this is that most market activity on S&P500 companies is driven by high frequency trading (HFT) activity; there is virtually no other reason for this figure to occur.  2/3 or all stock trading is done for no fundamental reasons, but because some algorithm has detected some minute arbitrage opportunity.

It also explains why long short equity strategies don’t function; in fact the stock market has become highly correlated, first the presence of ETF has ensured that investors are seeking investment strategies that are high beta (looking at riding the market – not picking the winners), and secondly the presence of HFT has insured the any slight anomaly will be corrected immediately.

Aside from aging baby boomers (in 2000 average age of baby boomers was 45 today its 55) that have decided that principal security is more important that riding the market (which has not generated any positive performance in a decade) hence an increased demand for fixed income securities, we find a rigged market where profit opportunities have been arbitraged away by algorithm. 

This will not end well!

Correction:  Please note that the figure of 11 seconds is an urban myth, but 2 minutes is an official figure -- not much of a difference.  As of Q1/2010, HFT accounted for 74% of all S&P500 trading...

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