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...

FX forward returns: basic empirical lessons

FX forward returns for 29 floating and convertible currencies since 1999 provide important empirical lessons. First, the long-term performance of FX returns has been...

The relation between value and momentum strategies

Simple value and momentum strategies often end up with opposite market positions. One strategy succeeds when the other fails. There are two plausible reasons...

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...

FX strategies based on real exchange rates

New empirical research provides guidance as to how to use real exchange rates for currency strategies. First, real exchange rates can serve as a...

Why financial markets misprice fundamental value

Experimental research has produced robust evidence for mispricing of assets relative to their fundamental values even with active trading and sufficient information. Academic studies...

The predictability of market-wide earnings revisions

Forward earnings yields are a key metric for the valuation of an equity market. Helpfully, I/B/E/S and DataStream publish forward earnings forecasts of analysts...

The predictability of relative asset returns

Empirical research suggests that it is easier to predict relative returns within an asset class than to predict absolute returns. Also, out-of-sample value generation...

Equity values and credit spreads: the inflation effect

A theoretical paper shows that a downward shift in expected inflation increases equity valuations and credit default risk at the same time. The reason...

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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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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