Portfolio volatility
AFM intraday and historical charts show a certain volatility. This is normal - price movements can be separated into two categories.
1. Random short-term price movements. Buy and sell orders flow into the markets from all over the world and each order is particular to the individual, institution or algorithm placing the order. These in turn create small variations in bid/ask quotes on which AFM depends to extract savings.
2. Unpredictable movements are determined by special events such as takeovers, profit warnings, de-listings, etc. over which AFM has neither control nor prior knowledge and are mainly responsible for a portfolio’s volatile performance.
Algorithms within the AFM application reduce the exposure to such unexpected events but cannot entirely eliminate them.
Only over time is AFM able to outperform the index.