US exceptionalism provided the same explanation for the outperformance of US stocks in the 1990s. However, that regime changed. From 2000-2007, while the S&P 500 Index returned just 1.9% per annum (underperforming riskless one-month Treasury bills by 1.3% per annum), the MSCI EAFE Index returned 5.6% per annum, and the MSCI Emerging Markets Index returned 15.3% per annum.
This paper seeks to address three pivotal questions that explore the broader economic and social impacts of IPO activity, particularly its role in influencing stock market participation through localized attention and wealth effects.
Since 2010, the S&P 500 has beaten the International Developed market in all but three years. This led the U.S. market to outperform International Developed by an astounding 8.14% compounded per year. Wowza! Talk about pain if you’re a global investor.
This study addresses a critical gap in financial forecasting by improving the accuracy of long-term expected return (E(R)) predictions. By evaluating various frameworks and proxies out-of-sample, free from biases like look-ahead bias, it provides more reliable methods for investors to make informed decisions about asset allocations.
Because the Sahm rule focuses solely on the unemployment rate, caution is warranted before assuming it is signaling a recession.
Knowing what economic regime we might be in won’t provide you with the crystal ball allowing you to foresee what geopolitical events will drive markets, whether “black swans” will appear, or identify whatever unexpected events or government policy actions will drive markets.
This paper explores the applicability of the Bernanke-Blanchard (BB) model across diverse economies, revealing commonalities and differences in inflation dynamics post-pandemic.
To date, the best metric we have for forecasting future equity returns and the ERP is current valuations. An interesting question is whether more complicated methods using newly developed machine learning models can provide superior forecasts.
The findings from this Hidden Markov Model analysis provide policymakers with valuable insights into the nature and behavior of inflation regimes. This information can inform the design and implementation of monetary, fiscal, and regulatory policies to effectively manage inflation, stabilize the economy, and promote sustainable economic growth.
This article studies whether index investing has implications for the informational efficiency of stock prices.
This example of research on political beta is an example of applying portfolio theory to problems associated with global politics.
Although geopolitical risk has traditionally been approached from a qualitative aspect, what makes it a novel risk is the application of innovative techniques to measure it.
Jules van Binsbergen, Liang Ma and Michael Schwert, authors of the September 2022 study “The Factor Multiverse: The Role of Interest Rates in Factor Discovery,” posed an interesting question: Are the findings of at least some of the reported anomalies the direct result of the 40-year secular decline in global interest rates and thus not really anomalies?
We examine the question of whether or not democracy leads to better possible outcomes for the stock market.
I find that returns are predictably negative for several months after the onset of recessions, becoming high only thereafter. I identify business cycle turning points by estimating a state-space model using macroeconomic data. Conditioning on the business cycle further reveals that returns exhibit momentum in recessions, whereas in expansions they display the mild reversals expected from discount rate changes. A strategy exploiting this pattern produces positive alphas. Using analyst forecast data, I show that my findings are consistent with investors' slow reaction to recessions. When expected returns are negative, analysts are too optimistic and their downward expectation revisions are exceptionally high.
The analysis above suggests that portfolios that include or exclude emerging allocations are roughly the same. For some readers, this may be a surprise, but for many readers, this may not be "news." That said, even if the data don't strictly justify an Emerging allocation, the first principle of "stay diversified" might be enough to make an allocation.
Of course, the assumptions always matter.
We study e-commerce across 47 economies and 26 industries during the COVID-19 pandemic using aggregated and anonymized transaction-level data from Mastercard, scaled to represent total consumer spending. The share of online transactions in total consumption increased more in economies with higher pre-pandemic e-commerce shares, exacerbating the digital divide across economies. Overall, the latest data suggest that these spikes in online spending shares are dissipating at the aggregate level, though there is variation across industries. In particular, the share of online spending in professional services and recreation has fallen below its pre-pandemic trend, but we observe a longer-lasting shift to digital in retail and restaurants.
How investors understand and use central bank communications, aka FEDSPEAK, is oftentimes cryptic and difficult to analyze. This study attempts to provide some clarity to this issue by applying textual analysis to both high-frequency price and communication data, to focus on episodes whereby stock price movements are identifiable and on investors’ reactions to specific sentences communicated by the Fed.
The question of whether or not the FED considers or responds to the stock market in its policy decisions has been studied fairly extensively, the subject of the existence of the "FED put" continues to pop up in the literature. In this particular revival of the issue, the authors are among the first to study FOMC minutes, transcripts, and other sources of information using textual analysis in order to provide an answer to the question: Does the FED respond to stock market events and if it does, what is the nature of the response?
Macro risks and the term structure of interest rates Bekaert, Engstrom, ErmolovJournal of Financial Economics, 2021A version of this paper can be found hereWant to read [...]
© Copyright 2023 alpha architect | All Rights Reserved | Home | Terms of Use | Privacy Policy | Disclosures | Subscribe | Contact Us
