Understanding international capital flows and shocks

Macro trading factors for FX must foremostly consider (gross) external investment positions. That is because modern international capital flows are mainly about financing, i.e....

Market-implied macro shocks

Combinations of equity returns and yield-curve changes can be used to classify market-implied underlying macro news. The methodology is structural vector autoregression. Theoretical ‘restrictions’...

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,...

External imbalances and FX returns

Hedge ratios of international investment positions have increased over past decades, spurred by regulation and expanding derivative markets. This has given rise to predictable...

Predicting volatility with heterogeneous autoregressive models

Heterogeneous autoregressive models of realized volatility have become a popular standard in financial market research. They use high-frequency volatility measures and the assumption that...

Joint predictability of FX and bond returns

When macroeconomic conditions change rational inattention and cognitive frictions plausibly prevent markets from adjusting expectations for futures interest rates immediately and fully. This is...

Equilibrium theory of Treasury yields

An equilibrium model for U.S. Treasury yields explains how macroeconomic trends and related expectations for future short-term interest rates shape the yield curve. Long-term...

Macro trading and macroeconomic trend indicators

Macroeconomic trends are powerful asset return factors because they affect risk aversion and risk-neutral valuations of securities at the same time. The influence of...

Tradable economics

Tradable economics is a technology for building systematic trading strategies based on economic data. Economic data are statistics that - unlike market prices -...

FX trading strategies based on output gaps

Macroeconomic theory suggests that currencies of countries in a strong cyclical position should appreciate against those in a weak position. One metric for cyclical...

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Estimating the positioning of trend followers

There is a simple method of approximating trend follower positioning in real-time and without lag. It is based on normalized returns in liquid futures...

Forecasting energy markets with macro data

Recent academic papers illustrate how macroeconomic data support predictions of energy market flows and prices. Valid macro indicators include shipping costs, industrial production measures,...

Fundamental trend following

Fundamental trend following uses moving averages of past fundamental data, such as valuation metrics or economic indicators, to predict future fundamentals, analogously to the...

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