Also, one big issue in 2008 is that no one thought so many different asset classes would be correlated together and so many were caught out when the market devolved into just 2 meta asset classes : "risk-on" and "risk-off". Can the algorithms account for this?
Can they also account for the fact that we have never seen such a persistently low interest rate environment in so many major economies at the same time? Or is that off-model? Looking at their human counterparts, a recent article speculated that it has been going on for so long, and there has been so much turnover at the financial institutions, that there may be many young traders who literally have no experience of what happens when interest rates are put to more normal levels.
Things like the major dislocation from the Swiss franc devaluation show the fallibility of trend following models that fail to capture the known-unknowns:
"When the “off-model” event was the breakdown of parts of the wholesale money market in 2007, their surprise was just about forgivable: in the case of the Swiss revaluation [which even Goldman Sachs called a '20-plus standard deviation' occurrence], to have failed to visualise the possibility is rank incompetence [2]."
-- [1] http://abcnews.go.com/Business/story?id=4842282&page=1&singl...
[2] http://www.ft.com/cms/s/0/5a06ef16-b5e4-11e4-a577-00144feab7...