Sticky expectations and predictable equity returns

New research documents that company earnings expectations of analysts have historically been sticky, plausibly reflecting that it takes time and effort to update forecasts. Such stickiness...

Seasonal effects in commodity futures curves

Seasonal fluctuations are evident for many commodity prices. However, their exact size can be quite uncertain. Hence, seasons affect commodity futures curves in two...

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...

Commodity trading strategies and convenience yields

Convenience yield can be interpreted as a leasing rate for physical commodities. Returns on convenience claims are premia earned by investment strategies for providing...

The information value of VIX

Two recent papers help understanding the information value of the implied volatility index for the S&P 500 stock index (VIX). An ECB paper de-composes VIX into...

China housing and global base metal prices

China consumes half of the world’s base metal supply. Its housing market is the most metal-intensive large sector. A new quantitative study shows that...

Variance risk premiums, volatility and FX returns

Variance risk premiums mark the difference between implied (future) and past volatility. They indicate changes in risk aversion or uncertainty. As these changes may...

How U.S. mutual funds reallocate assets

An empirical study shows that U.S. mutual funds take two major allocation decisions: bonds versus equity and U.S. versus non-U.S. assets. Federal Reserve policy...

The impact of regulatory reform on money markets

A new CGFS paper suggests that bank regulatory capital and liquidity changes may reduce liquidity in money markets, create steeper short-term yield...

Using yield curve information for FX trading

FX carry trading strategies only use short-term interest rates (and forward basis) as signal. Yet both theoretical and empirical research suggests that the whole...

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Drawdown control

Containment of drawdowns and optimization of performance ratios for multi-asset portfolios is critical for trading strategies. Alas, short data series or structural changes often...

Liquidity yields and FX

Liquidity yields are convenience yields of financial securities that typically arise from high liquidity, suitability as collateral or preferred regulatory status. New research argues...

The fundamental value trap

Fundamental value seems like a straightforward investment approach. One simply looks for assets that are “cheap” or “expensive” relative to their rationally expected risk-adjusted...

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