What traders can learn from market price volatility

Equity and bond market volatility can be decomposed into persistent and transitory components by means of statistical methods. The distinction is relevant for macro...

Simple international macroeconomics for trading

Simple New Keynesian macroeconomic models work well for analyzing the impact of various types of shocks on small open economies and emerging markets. The...

Simple macroeconomics for trading

Most modern dynamic economic models are too complex and ambiguous to support macro trading. A practical alternative is a simplified static model of the...

FX returns and external balances

A new paper supports the view that currency excess returns can to some extent be viewed as compensation for risk to net capital flows...

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...

Statistical remedies against macro information overload

"Dimension reduction" condenses the information content of a multitude of data series into small manageable set of factors or functions. This reduction is important...

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...

Using SVAR for macro trading strategies

Structural vector autoregression may be the most practical model class for empirical macroeconomics. Yet, it can also be employed for macro trading strategies, because...

Improving asset return forecasts with wavelets

Time series that are used for forecasting asset returns can carry information on trends of different persistence. Therefore, frequency decomposition of standard signals based on wavelets...

The drivers of commodity cycles

Demand shocks have been the dominant force behind non-oil commodity price cycles, according to a 145-year empirical analysis. They have been linked to global recessions...

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How to use financial conditions indices

There are two ways to use financial conditions indicators for macro trading. First, the tightening of aggregate financial conditions helps forecasting macroeconomic dynamics and...

The latent factors behind commodity price indices

A 35-year empirical study suggests that about one third of the monthly changes in a broad commodity price index can be attributed to a...

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...

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