The asymmetry of government bond returns
Developed market government bonds are viewed as “safe havens”, but in reality they have been prone to sudden outsized price declines, similar to FX...
The pitfalls of emerging markets asset management
Dedicated EM exposure has surged by over 55% since 2007, with assets concentrated on few managers. A new BIS article points out that trading...
Trend following in U.S. equities
Trend following is a systematic investment style that takes directional positions in accordance with the difference between the current price and a moving average. For...
Why and when “equity duration” matters
A new HSBC report suggests that if and when Quantitative Easing is being reversed it could be a watershed event for sectoral equity performance....
Leverage in asset management
Asset managers can use leverage to enhance returns. Outside hedge funds, such leverage is modest as share of assets under management. However, considering the huge...
Inefficient benchmarking and trading opportunities
Academic research explains how benchmarking induces investment managers to buy overvalued highly volatile assets. This makes markets inefficient and may even lead to a negative relation between...
A theory of herding and instability in bond markets
A theoretical Bank of Japan paper suggests that instability and herding in bond markets arises from low overall confidence of investors, great importance of...
How to recognize an asset price bubble
A new paper from the ETH Zurich defines bubbles as episodes of unsustainable and quickening asset price growth with accelerating corrections and rebounds. In...
On the vulnerability of local emerging debt markets
A new IMF paper provides evidence that increased foreign participation in local-currency emerging debt markets has made these significantly more vulnerable to foreign interest rate and risk...
Overconfidence and inattention as asset return factors
Overconfidence in personal beliefs and inattention to new trends are widespread in financial markets. If specific behavioural biases become common across investors they constitute...
RECENT ARTICLES
A brief history of quantitative equity strategies
Understanding quantitative equity investments means understanding a significant portion of market positions. Motivated by the apparent failure of the capital asset pricing model and...
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...
Earnings yields, equity carry and risk premia
Forward earnings yields and equity carry are plausible indicators of risk premia embedded in equity index futures prices. Data for a panel of 25...