The project

Systemic Risk and Systematic Value is dedicated to socially responsible macro trading strategies. Macro trading strategies are defined as alternative investment management styles predicated on macroeconomic and public policy events or trends. If the right principles and ethics are applied, social and economic benefits arise from an improved information value of market prices, increased efficiency of global capital allocation and reduced risk of financial markets crises.

SPECIAL: Market 'bubbles'

Why financial markets misprice fundamental value

Experimental research has produced robust evidence for mispricing of assets relative to their fundamental values even with active trading and sufficient information. Academic studies...

Explosive dynamics in exchange rates

Explosiveness in financial markets means that prices display exponential growth. In recent years statistical tests have been developed to locate mildly explosive bubble periods...

Pension funds and herding

Pension funds have three types of motivations for herding: rebalancing rules, the effects of regulatory changes and peer pressure of senior executives. A new...

SYSTEMIC RISK

How central banks can take nominal rates deeply negative

The popular view that nominal interest rates have a natural zero lower bound has become...

Bayesian Risk Forecasting

Portfolio risk forecasting is subject to great parameter uncertainty, particularly for longer forward horizons. This...

The duration extraction effect

Under non-conventional monetary policy central banks influence financial markets through the “portfolio rebalancing channel”. The...

Tiered reserve systems

Negative monetary policy rates can undermine financial transmission, because they encourage cash hoarding and reduce...

Signaling systemic risk

Systemic financial crises arise when vulnerable financial systems meet adverse shocks. A systemic risk indicator...

SYSTEMATIC VALUE

The mighty “long-long” trade

One of the most successful investment strategies since the turn of the century has been...

The rise in risk spreads

A risk spread is a premium for bearing economic risk of an investment, paid over...

Bad and good beta in FX strategies

Bad beta means market exposure that is expensive to hedge. Good beta is market exposure...

Active fund risk premia in emerging markets

Security returns, adjusted for market risk, contain risk premia that compensate for the exposure to...

Natural language processing for financial markets

News and comments are major drivers for asset prices, maybe more so than conventional price...

POPULAR POSTS

Leverage in asset management

Asset managers can use leverage to enhance returns. Outside hedge funds, such leverage is modest as share of assets under management. However, considering the huge...

The four components of long-term bond yields

A BOJ paper proposes an affine terms structure model for bond yields under consideration of the zero lower bound. It estimates the contribution of...

VIX term structure as a trading signal

The VIX futures curve reflects expectations of future implied volatility of S&P500 index options. The slope of the curve is indicative of expected volatility...

Basic theory of momentum strategies

Systematic momentum trading is a major alternative risk premium strategy across asset classes. Time series momentum motivates trend following; cross section momentum gives rise...

Understanding market beta in FX

The beta of an investment measures its sensitivity to “market returns”. Unlike in equity, in FX the relevant benchmark for a beta cannot be a...

Lessons from long-term global equity performance

A truly global and long-term (116 years) data set for both successful and failed financial markets shows that equity has delivered positive long-term performance...