A simple rule for exchange rate trends
Over the past decades developed market exchange rates have displayed two important regularities. First, real exchange rates (nominal exchange rates adjusted for domestic price...
Factor momentum: a brief introduction
Standard equity factors are autocorrelated. Hence, it is not surprising that factor strategies have also displayed momentum: past returns have historically predicted future returns....
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...
The macro forces behind equity-bond price correlation
Since the late 1990s, the negative price correlation of equity and high-grade bonds has reduced the volatility of balanced portfolios and boosted Sharpe ratios...
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...
CDS term premia and exchange rates
The term structure of sovereign credit default swaps (CDS) is indicative of country-specific financial shocks because rising country risk affects short-dated maturities more than...
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...
U.S. Treasuries: decomposing the yield curve and predicting returns
A new paper proposes to decompose the U.S. government bond yield curve by applying a ‘bootstrapping method’ that resamples observed return differences across maturities....
Tradable economics
Tradable economics is a technology for building systematic trading strategies based on economic data. Economic data are statistics that - unlike market prices -...
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....
RECENT ARTICLES
Inflation as equity trading signal
Academic research suggests that high and rising consumer price inflation puts upward pressure on real discount rates and is a headwind for equity market...
Economic growth and FX forward returns
Economic growth differentials are plausible predictors of foreign exchange return trends because they are related to differences in monetary policy and return on investment....
How to use FX carry in trading strategies
FX forward-implied carry is a valid basis for trading strategies because it is related to divergences in monetary and financial conditions. However, nominal carry...