The systems dynamics folks point out that systems with more rapid feedback often have more variability.
You've got systems dynamics folks completely backwards. Smaller, more frequent controls tend to stabilized systems, not make them unstable. A simple example we've all seen: take a stable ODE. Now try to discretize it - if you are unlucky or uncareful, your discrete approximation can easily blow up exponentially.
The example you provide is different - you are describing two different control strategies, one of which fails to correct for noise (and note: any HFT who makes this mistake loses money FAST). If you made orders every day based on the 7-day moving average, it would be better than making orders once per week based on the 7 day moving average.
This is exactly what we saw with the flash crash - there was a large exogenous shock and the system self-corrected within minutes.
You've got systems dynamics folks completely backwards. Smaller, more frequent controls tend to stabilized systems, not make them unstable. A simple example we've all seen: take a stable ODE. Now try to discretize it - if you are unlucky or uncareful, your discrete approximation can easily blow up exponentially.
The example you provide is different - you are describing two different control strategies, one of which fails to correct for noise (and note: any HFT who makes this mistake loses money FAST). If you made orders every day based on the 7-day moving average, it would be better than making orders once per week based on the 7 day moving average.
This is exactly what we saw with the flash crash - there was a large exogenous shock and the system self-corrected within minutes.