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...

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...

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....

Equity convexity and gamma strategies

Equity convexity means that a stock outperforms in times of large upward or downward movements of the broad market: its elasticity to the market...

How to construct a bond volatility index and extract market information

Volatility indices, based upon the methodology of the Cboe volatility index (VIX), serve as measures of near-term market uncertainty across asset classes. They are...

Equity factor timing with macro trends

Plausibility and empirical evidence suggest that the prices of equity factor portfolios are anchored by the macroeconomy in the long run. A new paper...

Macro trends for trading models

Unlike market price trends, macroeconomic trends are hard to track in real-time. Conventional econometric models are immutable and not backtestable for algorithmic trading. That...

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...

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Identifying the drivers of the commodity market

Commodity futures returns are correlated across many different raw materials and products. Research has identified various types of factors behind this commonality: macroeconomic...

Macro factors of the risk-parity trade

Risk-parity positioning in equity and (fixed income) duration has been a popular and successful investment strategy in past decades. However, part of that success...

Identifying market regimes via asset class correlations

A recent paper suggests identifying financial market regimes through the correlations of asset class returns. The basic idea is to calculate correlation matrixes for...

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