Origins of financial market trends

A working paper explores sources of market price trends. It suggests that small trend changes in perceptions about “fundamentals” can set in motion a persistent...

Passive investment vehicles and price distortions

The share of passive investment vehicles in financial markets has soared over the past 20 years. In the U.S. equity market it has risen...

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...

How human stress increases financial crisis risk

John Coates gives a neuroscience view on how human "stress response" can aggravate financial crises. Rising market volatility causes a bodily response in form...

How growing assets-under-management can compromise investment strategies

If investment funds maximize assets-under-management and end-investors allocate to outperforming funds, the investment process is compromised. A new theoretical paper suggests that asset managers...

Rational informational herding

It can be rational for traders to buy with rising prices and sell with falling prices. In particular, this should be the case if...

A theory of hedge fund runs

Hedge funds’ capital structure is vulnerable to market shocks because most of them offer high liquidity to loss-sensitive investors. Moreover, hedge fund managers form...

Liquidity risk in European bond markets

There are signs of liquidity decline and liquidity illusion in euro area government bond markets. Citibank research suggests that liquidity risk is rising due to increased capital...

The power of global financial cycles

There is theoretical reason and empirical evidence for a single global financial cycle driving capital flows across a wide range of markets. Federal Reserve...

How real money funds could destabilize bond markets

A paper by Feroli, Kashyap, Schoneholtz and Shin illustrates how unlevered funds can become a source of asset price momentum due to peer pressure...

RECENT ARTICLES

Active fund risk premia in emerging markets

Security returns, adjusted for market risk, contain risk premia that compensate for the exposure to active fund risk. The active fund risk premium of...

Natural language processing for financial markets

News and comments are major drivers for asset prices, maybe more so than conventional price and economic data. Yet it is impossible for any...

A theory of hedge fund runs

Hedge funds’ capital structure is vulnerable to market shocks because most of them offer high liquidity to loss-sensitive investors. Moreover, hedge fund managers form...

POPULAR ARTICLES