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...

Inflation differentials and equity returns

Inflation differentials and equity returns There is evidence that equity markets fail to adjust to persistent cross-country shifts in inflation in a timely and efficient manner....

Policy rates and equity returns: the “slope factor”

A long-term empirical analysis suggests that faster expected monetary policy tightening in future months leads equity market underperformance. The predictive factor can be modelled...

Term premia in the times of “lift-off”

Equilibrium models suggest that as long as the policy rate is firmly near zero, the term premium on longer-dated yields is compressed by a...

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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...

FX strategies based on quanto contract information

Quantos are derivatives that settle in currencies different from the denomination of the underlying contract. Therefore, quanto index contracts for the S&P 500 provide...

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...

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