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...

Inflation: risk without premium

Historically, securities that lose value as inflation increases have paid a sizable risk premium. However, there is evidence that inflation risk premia have vanished...

FX strategies based on real exchange rates

New empirical research provides guidance as to how to use real exchange rates for currency strategies. First, real exchange rates can serve as a...

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Commodity carry

Across assets, carry is defined as return for unchanged prices and is calculated based on the difference between spot and futures prices (view post...

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....

CDS term premia and exchange rates

The term structure of sovereign credit default swaps (CDS) is indicative of country-specific financial shocks because rising country risk affects short-dated maturities more than...

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