The predictability of market-wide earnings revisions
Forward earnings yields are a key metric for the valuation of an equity market. Helpfully, I/B/E/S and DataStream publish forward earnings forecasts of analysts...
Earnings yields, equity carry and risk premia
Forward earnings yields and equity carry are plausible indicators of risk premia embedded in equity index futures prices. Data for a panel of 25...
Seasonal effects in commodity futures curves
Seasonal fluctuations are evident for many commodity prices. However, their exact size can be quite uncertain. Hence, seasons affect commodity futures curves in two...
Term premia and macro factors
The fixed income term premium is the difference between the yield of a longer-maturity bond and the average expected risk-free short-term rate for that...
The predictability of relative asset returns
Empirical research suggests that it is easier to predict relative returns within an asset class than to predict absolute returns. Also, out-of-sample value generation...
Critical transitions in financial markets
Critical transitions in financial markets are shifts in prices and operational structure to a new equilibrium after reaching a tipping point. “Complexity theory” helps...
FX forward returns: basic empirical lessons
FX forward returns for 29 floating and convertible currencies since 1999 provide important empirical lessons. First, the long-term performance of FX returns has been...
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...
Understanding negative inflation risk premia
Inflation risk premia in the U.S. and the euro area have disappeared or even turned negative since the great financial crisis, according to various...
Debt-weighted exchange rates
Trade-weighted exchange rates help assessing the impact of past currency depreciation on economic growth through the external trade channel. Debt-weighted exchange rates help assessing...
RECENT ARTICLES
Implicit subsidies paid in financial markets: updated primer
Implicit subsidies in financial markets are premia paid through transactions that have motives other than conventional risk-return optimization. They manifest as expected returns over...
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...
Tiered reserve systems
Negative monetary policy rates can undermine financial transmission, because they encourage cash hoarding and reduce the profitability of traditional banking. This danger increases with...