SPECIAL: Bond yields
Analyzing global fixed income markets with tensors
Roughly speaking, a tensor is an array (generalization of a matrix) of numbers that transform according to certain rules when the array’s coordinates change....
The duration extraction effect
Under non-conventional monetary policy central banks influence financial markets through the “portfolio rebalancing channel”. The purchase of assets changes the structure of prices. A...
Understanding the correlation of equity and bond returns
The correlation of equity and high grade sovereign bond returns is a powerful driver of portfolio construction and the term premia of interest rates....
How convenience yields have compressed real interest rates
Real interest rates on ‘safe’ assets such as high-quality government bonds had been stationary around 2% for more than a century until the 1980s....
"Pricing of assets relies on forecasts of cash flows...We use machine learning to construct an...unbiased benchmark for firms' earnings expectations...useful as input to asset pricing...Analyst expectations are on average biased upwards." https://t.co/33exkWjsMj https://t.co/rh2d3crwKl
"Thermodynamics of markets:...There is a deep analogy between the parameters of thermodynamic and economic systems (markets); in particular, each thermodynamic parameter can be associated with a certain economic parameter or indicator." https://t.co/nSVMI4W3JB https://t.co/gR6lPr7u3O
"Machine learning models uncover economically sensible relationships between historical financial information and future earnings...The new information...is significantly associated with future stock returns." https://t.co/hu1Vf2YBlZ https://t.co/prPufHUvfj
TAGS
asset management Asset Purchase Program banks bond returns bond yields bubbles capital regulation China collateral commodities credit returns default ECB economic data EM equity returns euro area crisis Fed financial crisis FX FX interventions FX returns government debt government deficits herding inflation information leverage liquidity market turmoil price factors regulation risk management shadow banking statistical methods term structure trend following variance risk premium volatility ZLB
SYSTEMIC RISK
Understanding international capital flows and shocks
Macro trading factors for FX must foremostly consider (gross) external investment positions. That is because...
Measures of market risk and uncertainty
In financial markets, risk refers to the probability distribution of future returns. Uncertainty is a...
Modern financial system risk for macro trading
Financial system risk is the main constraint and disruptor of macro trading strategies. There are...
Public finance risk
Fiscal expansion was the logical response to the 2020 health and economic crisis. Alas, public...
Systemic risk under non-conventional monetary policy
Central bank operations in the form of quantitative easing, qualitative easing, forward guidance and collateral...
SYSTEMATIC VALUE
Prospect theory value as investment factor
Prospect theory value as investment factor
Prospect theory value is a valid investment factor, particularly in...
Understanding international capital flows and shocks
Macro trading factors for FX must foremostly consider (gross) external investment positions. That is because...
R tidyverse for macro trading research
The tidyverse is a collection of packages that facilitate data science with R. It is...
Nowcasting with MIDAS regressions
Nowcasting macro-financial indicators requires combining low-frequency and high-frequency time series. Mixed data sampling (MIDAS) regressions...
Market-implied macro shocks
Combinations of equity returns and yield-curve changes can be used to classify market-implied underlying macro...
POPULAR POSTS
Understanding dollar cross-currency basis
Covered interest parity is an arbitrage condition that equalizes costs of direct USD funding and of synthetic USD funding through FX swaps. Deviations are...
The dangerous disregard for fat tails in quantitative finance
The statistical term ‘fat tails’ refers to probability distributions with relatively high probability of extreme outcomes. Fat tails also imply strong influence of extreme...
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...
Understanding the correlation of equity and bond returns
The correlation of equity and high grade sovereign bond returns is a powerful driver of portfolio construction and the term premia of interest rates....
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 importance of volatility of volatility
Options-implied volatility of U.S. equity prices is measured by the volatility index, VIX. Options-implied volatility of volatility is measured by the volatility-of-volatility index, VVIX....