A Reddit Army Descends on Hedge Funds Chained by Risk Models
(Bloomberg) -- A hellish week for hedge funds will be remembered for how much damage Reddit traders caused by chasing a handful of the most-shorted names in the $43 trillion U.S. stock market.But just why were the institutional pros forced to downsize their market exposures at the fastest pace since pandemic-spurred March rout?One reason is that their risk models told them to.As a flood of retail money sent stocks like GameStop Corp. and AMC Entertainment Holdings Inc. surging, the trading signals that guide how the smart money invest flashed red.Known as Value at Risk, this crude but widely u...