The dangers of leveraged ETFs

Leveraged Exchange Traded Funds have become a significant factor in the U.S. equity market. According to a new Federal Reserve discussion paper their mechanical rebalancing...

The rise of asset management

Bank of England's Andrew Haldane has summarized the rise and risks of asset management in a recent speech. As demographics and economic development propel...

The volatility paradox

Brunnermeier and Sannikov illustrate in a formal model why fundamental risk and asset market volatility can be out of sync. They focus on endogenous...

Detecting market price distortions with neural networks

Detecting price deviations from fundamental value is challenging because the fundamental value itself is uncertain. A shortcut for doing so is to look at...

On the vulnerability of local emerging debt markets

A new IMF paper provides evidence that increased foreign participation in local-currency emerging debt markets has made these significantly more vulnerable to foreign interest rate and risk...

Why and when “equity duration” matters

A new HSBC report suggests that if and when Quantitative Easing is being reversed it could be a watershed event for sectoral equity performance....

Commodity exchange prices: The curious case of aluminum

Goldman Sachs Research takes another look at soaring warehouse queues and fears of price distortions in the aluminum market (see previous post here). A...

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Crashes in safe asset markets

A new theoretical paper illustrates the logic behind runs and crashes in modern safe asset markets. Safe assets are characterized by stable value and...

Copulas and trading strategies

Reliance on linear correlation coefficients and joint normal distribution of returns in multi-asset trading strategies can be badly misleading. Such conventions often overestimate diversification...

Trend following: combining market and macro information

Classic trend following is based on market prices or returns. Market trends are relatively cheap to produce, popular, and plausibly generate value in the...

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