Information inattentiveness of financial markets

Academic research explains macroeconomic information inefficiency with "stickiness” and “signal extraction problems”. Information stickiness means that forecasts cannot be updated continuously and hence markets...

How growing assets-under-management can compromise investment strategies

If investment funds maximize assets-under-management and end-investors allocate to outperforming funds, the investment process is compromised. A new theoretical paper suggests that asset managers...

Liquidity events

A recent speech by Fed governor Jerome Powell highlights recurrent episodes of short-term distress and vanishing liquidity in large developed markets. Increases in trading...

Why is volatility so low while uncertainty is still so high?

This note from Claudio Irigoyen and others supports the notion that implied volatilities naturally return to long-term trend even if economic uncertainty does not....

Metals price distortions and the warehouse system

In a short note Macquarie’s commodity research reviews price distortions and prospective changes related to the warehouse system of the London Metals Exchange (LME). Since...

Trading strategies based on implicit subsidies

Detecting implicit subsidies is one of the most effective principles of building macro trading strategies. Implicit subsidies manifest as expected excess returns over and...

The impact of U.S. economic data surprises

A new paper estimated the short-term effects of U.S. economic data surprises on treasury notes and USD exchange rates over the past 20 years....

Large currency moves and equity performance

Citi equity research investigates the relation between currencies and equity markets. It suggests that typically large currency appreciation (depreciation) coincides with underperformance (outperformance) of...

The limited effect of FX interventions

In a new BIS paper K. Miyajima provides evidence that unsterilized FX interventions in emerging market economies fail to influence exchange rate forecasts (as...

Intervention liquidity

Unsterilized central bank interventions in foreign exchange and securities markets increase base money liquidity independently from demand. Thus, they principally affect the money price...

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Transaction costs and portfolio strategies

Transaction costs are a key consideration for the development of trading strategies; and not just in final profitability checks. Indeed, disregard for trading costs...

Intervention liquidity

Unsterilized central bank interventions in foreign exchange and securities markets increase base money liquidity independently from demand. Thus, they principally affect the money price...

Trading strategies based on implicit subsidies

Detecting implicit subsidies is one of the most effective principles of building macro trading strategies. Implicit subsidies manifest as expected excess returns over and...

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