Market-implied macro shocks

Combinations of equity returns and yield-curve changes can be used to classify market-implied underlying macro news. The methodology is structural vector autoregression. Theoretical ‘restrictions’...

Nowcasting for financial markets

Nowcasting is a modern approach to monitoring economic conditions in real-time. It makes financial market trading more efficient because economic dynamics drive corporate profits,...

Joint predictability of FX and bond returns

When macroeconomic conditions change rational inattention and cognitive frictions plausibly prevent markets from adjusting expectations for futures interest rates immediately and fully. This is...

Lagged correlation between asset prices

Efficient market theory assumes that all market prices incorporate all information at the same time. Realistically, different market segments focus on different news flows,...

Tracking investor expectations with ETF data

Retail investors' return expectations affect market momentum and risk premia. The rise of ETFs with varying and inverse leverage offers an opportunity to estimate...

The q-factor model for equity returns

Investment-based capital asset pricing looks at equity returns from the angle of issuers, rather than investors. It is based on the cost of capital...

The predictive superiority of ensemble methods for CDS spreads

Through 'R' and 'Python' one can apply a wide range of methods for predicting financial market variables. Key concepts include penalized regression, such as...

Basic factor investment for bonds

Popular factors for government bond investment are “carry”, “momentum”, “value” and “defensive”. “Carry” depends on the steepness of the yield curve, which to some...

A method for de-trending asset prices

Financial market prices and return indices are non-stationary time series, even in logarithmic form. This means not only that they are drifting, but also...

Tradable economics

Tradable economics is a technology for building systematic trading strategies based on economic data. Economic data are statistics that - unlike market prices -...

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Estimating the positioning of trend followers

There is a simple method of approximating trend follower positioning in real-time and without lag. It is based on normalized returns in liquid futures...

Forecasting energy markets with macro data

Recent academic papers illustrate how macroeconomic data support predictions of energy market flows and prices. Valid macro indicators include shipping costs, industrial production measures,...

Fundamental trend following

Fundamental trend following uses moving averages of past fundamental data, such as valuation metrics or economic indicators, to predict future fundamentals, analogously to the...

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