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...
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...
The fundamental value trap
Fundamental value seems like a straightforward investment approach. One simply looks for assets that are “cheap” or “expensive” relative to their rationally expected risk-adjusted...
Predicting bond returns
Simple regression is inadequate for predicting bond returns, as the character of rates markets changes fundamentally with economic conditions. In financial modelling terms this...
Predicting equity market corrections
Assessing the risk of equity market “crashes”, academic work has focused on price-earnings ratios and bond-stock earnings yield differentials. A recent paper by Lleo...
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...
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...
How current accounts mislead FX markets
A common fallacy is that current account deficits measure dependence on external financing. In reality, external balances and cross border financing are only vaguely...
RECENT ARTICLES
The power of R for trading (part 2)
The R environment makes statistical estimation and learning accessible to portfolio management beyond the traditional quant space. Overcoming technicalities and jargon, managers can operate...
The power of R for trading (part 1)
R is an object-oriented programming language and work environment for statistical analysis. It is not just for programmers, but for everyone conducting data analysis,...
Retail investor beliefs
Survey evidence suggests that retail investors adjust positions rather sluggishly to changing beliefs and the beliefs themselves contradict classic rationality. Sluggishness arises from two...