Summary: information efficient tracking of macroeconomic trends

This post briefly summarizes why markets are struggling to price macroeconomic trends efficiently. The summary is identical to this blog's page "Systematic Value III:...

Rules of thumb for banking and currency crisis risk

A new ECB paper explores macroeconomic indicators for banking and currency crises over the past 40 years. Banking crises arose mostly in constellations of...

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...

The correlation risk premium

The correlation risk premium is a premium for uncertainty of future correlation of securities among each other or with a benchmark. A rise in...

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...

Predicting equity volatility with return dispersion

Equity return dispersion is measured as the standard deviation of returns across different stocks or portfolios. Unlike volatility it can be measured even for...

The “de-anchoring” of inflation in the euro area

Two recent empirical studies highlight the risk that inflation expectations in the euro area are becoming de-anchored, similar to Japan. De-anchoring means that short-term price...

Combining fundamentals- and momentum-based equity strategies

A University of York paper suggests that equity strategies based on fundamentals and strategies based on momentum are complementary. Thus, relative momentum seems to...

Information inattentiveness of financial markets

Academic research explains macroeconomic information inefficiency with "stickiness” and “signal extraction problems”. Information stickiness means that forecasts cannot be updated continuously and hence markets...

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...

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