The four components of long-term bond yields

A BOJ paper proposes an affine terms structure model for bond yields under consideration of the zero lower bound. It estimates the contribution of...

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...

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,...

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...

FX carry strategies (part 1)

FX forward-implied carry is a valid basis for investment strategies because it is related to policy subsidies and risk premia. However, it also contains...

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...

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,...

Fixed income carry as trading signal

Empirical evidence for 27 markets suggests that carry on interest rate swaps has been positively correlated with subsequent returns for the past two decades....

Algorithmic strategies: managing the overfitting bias

The business of algorithmic trading strategies creates incentives for model overfitting and backtest embellishment: researchers must pass Sharpe ratio thresholds for their strategies to...

Understanding bid-offer spreads in OTC markets

Bid-offer spreads are traditionally explained by inventory costs, operating expenses and dealers’ risk of transacting with better-informed clients. In OTC (over-the-counter) markets, however, client...

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Inflation as equity trading signal

Academic research suggests that high and rising consumer price inflation puts upward pressure on real discount rates and is a headwind for equity market...

Economic growth and FX forward returns

Economic growth differentials are plausible predictors of foreign exchange return trends because they are related to differences in monetary policy and return on investment....

How to use FX carry in trading strategies

FX forward-implied carry is a valid basis for trading strategies because it is related to divergences in monetary and financial conditions. However, nominal carry...

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