What if a quant equity factor crash echoes August 2007?
A sharp momentum-to-value reversal detonating crowded stat-arb books is a mechanical unwind, not a macro event — crowded high-beta longs (SOL/Nasdaq) and credit gap as books degross into the reversal. This is explicitly the Aug 2007 quant quake replayed, which whipsawed factor portfolios over days before reverting. Contagion runs through shared leverage and overlapping signals across funds. Forward angle: such crashes mean-revert within sessions; the actionable edge is fading the factor extreme and re-adding the names degrossed under duress.
how we built this number — every step
The class rate is measured from our dated, sourced event library (decade-normalized Poisson — the full table is public at base_rates.json). The variant’s share within its class is the analyst’s editorial call, published so you can audit it. A wider range means thinner precedent. Full recipe: methodology · scored at Reality Check.
The butterfly cascade
How this trigger trickles across markets, left → right — the root shock, its first‑order moves, then the ripple effects. Drag any node; tap a market for its real price history.
Resolution timeline — how this probability is moving
Our model's odds (gold) over time vs the crowd's (Polymarket, blue), from the past toward the 0–6 months horizon. Each dot is a real macro event that nudged the probability — green pushed it up, red pushed it down. Tap a dot for the source. The gold path is an illustrative reconstruction anchored to today's estimate — real dated events, not a live re-estimate history.
What it would mean
If this plays out, it is a risk-off shock. A sudden momentum-to-value reversal detonates crowded statistical-arbitrage books, echoing August 2007 in a single brutal session. The trigger decomposes into signed root‑shocks — Financial conditions ▲ · Risk appetite ▼ — which propagate through our causal graph to the markets below.
If it happens — the markets it would move
Biggest moves first. Projected moves are cascade-model priors; hist A–B% = what comparable past events actually did (measured abnormal returns), and model prior · unmeasured marks markets with no analogue backing yet. Tap any market for its price history.
| Market | Class | Projected move | |
|---|---|---|---|
| 1 | Solana SOLon Hyperliquid 📈 chart | Crypto | ▼ -2.2% hist -13.47–+0.4% · other way -1.04% (n=11) |
| 2 | MicroStrategy MSTRon Hyperliquid 📈 chart | Equity | ▼ -2.2% hist -5.24–+0.58% · other way +27.47% (n=12) |
| 3 | Ether ETHon Hyperliquid 📈 chart | Crypto | ▼ -1.6% hist -9.7–+1.63% · other way +4.87% (n=11) |
| 4 | Hyperliquid (HYPE) HYPEon Hyperliquid | Crypto | ▼ -1.6% model prior · unmeasured |
| 5 | Nasdaq 100 NDXon Hyperliquid 📈 chart | Index | ▼ -1.5% hist -1.47–-0.28% · other way +0.06% (n=12) |
| 6 | Bitcoin BTCon Hyperliquid 📈 chart | Crypto | ▼ -1.2% hist -4.53–+1.02% · other way +6.05% (n=11) |
| 7 | Volatility (VIX) VIXon Hyperliquid 📈 chart | Vol | ▲ +1.0% hist -1.57–+4.51% · other way -0.58% (n=12) |
| 8 | Tech sector XLK 📈 chart | Equity | ▼ -1.0% hist -0.75–-0.17% · other way +0.09% (n=12) |
| 9 | S&P 500 SPXon Hyperliquid 📈 chart | Index | ▼ -0.8% hist -0.69–-0.23% · other way +0.04% (n=12) |
| 10 | Coinbase COINon Hyperliquid 📈 chart | Equity | ▼ -0.8% hist -4.36–+1.29% · other way +21.75% (n=11) |
| 11 | High-yield credit HYG 📈 chart | Rate | ▼ -0.7% hist -0.68–-0.08% · other way -0.28% (n=12) |
| 12 | Semiconductors SMHon Hyperliquid 📈 chart | Equity | ▼ -0.7% hist -0.66–+0.94% · other way +2.75% (n=12) |
| 13 | Nvidia NVDAon Hyperliquid 📈 chart | Equity | ▼ -0.5% hist -1.47–+2.29% · other way +3.35% (n=12) |
| 14 | Financials XLF 📈 chart | Equity | ▼ -0.4% hist -0.23–-0.06% · other way +0.01% (n=12) |
Probable recommendation
Why we may diverge from history
Trust the cascade short on INTC: the +4.8% base rate is the March-2023 SVB-bounce cluster (regime-biased) plus INTC's own foundry driver; a momentum-to-value stat-arb crash dumps crowded longs, history misleads.
Historical precedent — what analogous events actually did
Across 40 analogous events (overlap‑weighted), as abnormal returns — market beta stripped, so it's the event's own effect, not the market backdrop. Shown at 20 days (persistent) and 5 days (immediate); ↺ fades = the two horizons disagree. Confidence = consistency × sample × significance.
| Asset | History says | Abnormal (20d · 5d) | Hit | n | Confidence | vs cascade |
|---|---|---|---|---|---|---|
| SOL SOL | SHORT | -10.0% · 5d -7.8% | 83% | 20 | 0.42 | ✓ matches cascade |
| ETH ETH | SHORT | -7.8% · 5d -5.6% | 70% | 20 | 0.27 | ✓ matches cascade |
| High-yield credit HYG | SHORT | -0.3% · 5d +0.0% ↺ fades | 66% | 35 | 0.26 | ✓ matches cascade |
| MSTR MSTR | SHORT | -3.8% · 5d -3.3% | 65% | 37 | 0.25 | ✓ matches cascade |
| Gold XAU | LONG | +0.7% · 5d +0.2% | 61% | 37 | 0.20 | ✓ matches cascade |
| SMH SMH | LONG | +1.2% · 5d -0.9% ↺ fades | 60% | 37 | 0.16 | ⚠ differs |
| Bitcoin BTC | SHORT | -3.6% · 5d -2.1% | 60% | 21 | 0.15 | ✓ matches cascade |
| COIN COIN | SHORT | -3.7% · 5d +1.5% ↺ fades | 57% | 20 | 0.12 | ✓ matches cascade |
| ASML ASML | SHORT | -2.2% · 5d -3.0% | 58% | 37 | 0.12 | ✓ matches cascade |
| XLF XLF | LONG | +0.1% · 5d -1.0% ↺ fades | 56% | 37 | 0.11 | ⚠ differs |
| AVGO AVGO | LONG | +2.2% · 5d -0.8% ↺ fades | 56% | 29 | 0.11 | ⚠ differs |
| QCOM QCOM | SHORT | -2.3% · 5d -3.0% | 58% | 38 | 0.10 | ✓ matches cascade |
| USDJPY USDJPY | LONG | +0.0% · 5d -0.2% ↺ fades | 54% | 37 | 0.08 | ⚠ differs |
| NDX NDX | SHORT | -0.6% · 5d -1.7% | 54% | 39 | 0.07 | ✓ matches cascade |
Why this probability
Quant factor unwinds recur but a single-session 2007-scale crash is less frequent. A base‑rate‑anchored prior, continuously scored against what actually happens — not a forecast.