The project

Systemic Risk and Systematic Value is dedicated to socially responsible macro trading strategies. Macro trading strategies are alternative investment management styles based on macroeconomic and policy trends. If the right principles and ethics are applied, social and economic benefits arise from an improved information value of market prices, increased efficiency of capital allocation and reduced risk of financial crises.

SPECIAL: Commodities

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,...

Commodity carry

Across assets, carry is defined as return for unchanged prices and is calculated based on the difference between spot and futures prices (view post...

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...

Commodity pricing

A new paper combines two key aspects of commodity pricing: a rational pricing model based on the present value of future convenience yields...

Twitter Feed


"Institutional investors 'herd', i.e. mimic each other's trades, in response to political uncertainty...[proxied by] economic policy uncertainty index...Overall...the effect of political uncertainty on financial markets is larger than previously thought." https://t.co/p2y2HjoODR https://t.co/wpriUjuW94 macro_srsv photo

"If Bitcoin is indeed gold-like the correlation of Bitcoin and gold returns should be positive. We estimate the correlation of the two assets across time, across different return frequencies, and across quantiles and find a near-zero correlation." https://t.co/kLGjZwGLI5 https://t.co/lrM1d6WmF4 macro_srsv photo

Very brief summary of "Behavioral Economics and Financial Decision Making" explaining cognitive biases such as confirmation bias, overconfidence bias, loss aversion, endowment effect, status quo bias, and biases related to choice overload. https://t.co/awTM6NxHrY https://t.co/Fl7zghLebt macro_srsv photo

TAGS

SYSTEMIC RISK

Market dynamics: belief, risk, and ambiguity effects

To understand financial market dynamics, it is helpful to distinguish beliefs, attitudes towards risk, and...

Building a real-time market distress index

A new Fed paper explains how to construct a real-time distress index, using the case...

The financial stability interest rate

The financial stability interest rate is a threshold above which the real interest rate in...

Contagion and self-fulfilling dynamics

Contagion and self-fulfilling feedback loops are propagation mechanisms at the heart of systemic financial crises....

Macro uncertainty as predictor of market volatility

Market volatility measures the size of variations of asset returns. Macroeconomic uncertainty measures the size...

SYSTEMATIC VALUE

Accounting data as investment factors

Corporate balance sheet data are important building blocks of quantitative-fundamental (“quantamental”) investment factors. However, accounting...

Diversified reward-risk parity

Risk parity is a portfolio construction technique that seeks to equalize risk contributions from the...

A market-to-book formula for equity strategies

A new proxy formula for equity market-to-book ratios suggests that (the logarithm of) such a...

Markets’ neglect of macro news

Empirical evidence suggests that investors pay less attention to macroeconomic news when market sentiment is...

Factor momentum: a brief introduction

Standard equity factors are autocorrelated. Hence, it is not surprising that factor strategies have also...

POPULAR POSTS

The dangerous disregard for fat tails in quantitative finance

The statistical term ‘fat tails’ refers to probability distributions with relatively high probability of extreme outcomes. Fat tails also imply strong influence of extreme...

Understanding dollar cross-currency basis

Covered interest parity is an arbitrage condition that equalizes costs of direct USD funding and of synthetic USD funding through FX swaps. Deviations are...

VIX term structure as a trading signal

The VIX futures curve reflects expectations of future implied volatility of S&P500 index options. The slope of the curve is indicative of expected volatility...

Understanding the correlation of equity and bond returns

The correlation of equity and high grade sovereign bond returns is a powerful driver of portfolio construction and the term premia of interest rates....

The importance of volatility of volatility

Options-implied volatility of U.S. equity prices is measured by the volatility index, VIX. Options-implied volatility of volatility is measured by the volatility-of-volatility index, VVIX....

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...