FX carry strategies (part 1)

FX forward-implied carry is a valid basis for investment strategies because it is related to policy subsidies and risk premia. However, it also contains...

Classifying market regimes

Market regimes are clusters of persistent market conditions. They affect the relevance of investment factors and the success of trading strategies. The practical challenge...

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,...

Commodity pricing

A new paper combines two key aspects of commodity pricing: a rational pricing model based on the present value of future convenience yields...

Lessons from long-term global equity performance

A truly global and long-term (116 years) data set for both successful and failed financial markets shows that equity has delivered positive long-term performance...

Fixed income carry as trading signal

Empirical evidence for 27 markets suggests that carry on interest rate swaps has been positively correlated with subsequent returns for the past two decades....

The price effects of order flow

Order flow means buyer- or seller-initiated transactions at electronic exchanges. Order flow consumes liquidity provided by market makers and drives a wedge between transacted...

Nowcasting with MIDAS regressions

Nowcasting macro-financial indicators requires combining low-frequency and high-frequency time series. Mixed data sampling (MIDAS) regressions explain a low-frequency variable based on high-frequency variables and...

Commodity carry

Across assets, carry is defined as return for unchanged prices and is calculated based on the difference between spot and futures prices (view post...

Modelling the relation between volatility and returns

There is evidence for a double relation between volatility and returns in equity markets. Longer-term fluctuations of volatility mostly reflect risk premiums and hence...

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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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