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...
Markets’ neglect of macro news
Empirical evidence suggests that investors pay less attention to macroeconomic news when market sentiment is positive. Market responses to economic data surprises have historically...
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....
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...
Macro information waste and the quantamental solution
Financial markets are not macro information efficient. This means that investment decisions miss out on ample relevant macroeconomic data and facts. Information goes to...
Statistical arbitrage risk premium
Any asset can use a portfolio of similar assets to hedge against its factor exposure. The factor residual risk of the hedged position is...
Market dynamics: belief, risk, and ambiguity effects
To understand financial market dynamics, it is helpful to distinguish beliefs, attitudes towards risk, and attitudes towards ambiguity. Beliefs are subjective evaluations of future...
Building a real-time market distress index
A new Fed paper explains how to construct a real-time distress index, using the case of the corporate bond market. The index is based...
Understanding the disposition effect
Investors have a tendency to sell assets that have earned them positive returns and are reluctant to let go of those that have brought...
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...
RECENT ARTICLES
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...