Macro uncertainty as predictor of market volatility

Market volatility measures the size of variations of asset returns. Macroeconomic uncertainty measures the size of unpredictable disturbances in economic activity. Large moves in...

What traders should know about seasonal adjustment

The purpose of seasonal adjustment is to remove seasonal and calendar effects from economic time series. It is a common procedure but also a...

Inflation and precious metal prices

Theory and plausibility suggest that precious metal prices benefit from inflation and negative real interest rates. This makes gold, silver, platinum, and palladium natural...

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...

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...

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Accounting data as investment factors

Corporate balance sheet data are important building blocks of quantitative-fundamental (“quantamental”) investment factors. However, accounting terms are easily misunderstood and confused with economic concepts....

Diversified reward-risk parity

Risk parity is a portfolio construction technique that seeks to equalize risk contributions from the different components of the portfolio. Risk parity with respect...

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 ratio is equal to the discounted expected value of...

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