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: Trend following

Passive investment vehicles and price distortions

The share of passive investment vehicles in financial markets has soared over the past 20 years. In the U.S. equity market it has risen...

Trend following and the headwinds of rising yields

The decline in bond yields over the past decades has supported profitability and diversification value of trend followers. Returns have been boosted by a...

Cash hoarding and market dynamics

Institutional asset managers can aggravate market swings due to the pro-cyclicality of redemptions, internal leverage and cash positions. A new empirical analysis shows that...

SYSTEMIC RISK

How systemic financial risk is measured

Public institutions have developed a wide range of methods to track systemic financial risk. What...

How convenience yields have compressed real interest rates

Real interest rates on ‘safe’ assets such as high-quality government bonds had been stationary around...

How regulatory reform shapes the financial cycle

Ambitious regulatory reform has changed the dynamics of the global financial system. Capital ratios of...

Predicting equity volatility with return dispersion

Equity return dispersion is measured as the standard deviation of returns across different stocks or...

Low rates troubles for insurances and pension funds

A CGFS report highlights the pressure of a ‘low for long’ interest rate environment on...

SYSTEMATIC VALUE

Drawdown control

Containment of drawdowns and optimization of performance ratios for multi-asset portfolios is critical for trading...

Liquidity yields and FX

Liquidity yields are convenience yields of financial securities that typically arise from high liquidity, suitability...

The fundamental value trap

Fundamental value seems like a straightforward investment approach. One simply looks for assets that are...

Equity values and credit spreads: the inflation effect

A theoretical paper shows that a downward shift in expected inflation increases equity valuations and...

Modern backtesting with integrity

Machine learning offers powerful tools for backtesting trading strategies. However, its computational power and convenience...

POPULAR POSTS

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...

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...

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...

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...

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...