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Sometimes something goes bump in the night. With a sudden lurch in prices, usually down, the measured volatility spikes on lots of things.
The formulas they use can trigger big selloff when there is a dip in the market, selling at the new lower price, and all those funds (bazillions worth) are in the same positions.
As they sell, they trigger each other's rules to sell more and more.

The amount of money tracking risk parity these days certainly dwarfs, say, the amount of money using "portfolio protection" strategies in 1987.
When a whole lot of money follows the same formula, and that formula is based on recent prices, sometimes things get interesting.


When investors or investment managers follow a similar strategy then the strategy alone can become a market moving factor. Risk Parity is only one strategy with influence. The quarterly rebalancing of the 60/40 portfolios is something that the large iBanks anticipate. And then there are the various moving average strategies based upon 200 dma which change allocations of funds. When the investment mandate of funds requires fixed allocations to asset classes there are going to be people trying to front run those trades.

Probably not a lot of institutional money following the $NAHL or the tpoto Two Ratios methods.
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