The Weekly T Report: BJ and the Bear – TF Market Advisors
So what, when, where, and how will the CB’s and governments intervene?
to infinity and beyond – The Research Puzzle
Investments are made not just on their merits, but in comparison to the crowd of investors against which you compete and the benchmark against which you are measured.
Your Self-Inflicted 6% Trading Tax – The Psy-Fi Blog
We’ve already looked at the gross amount of money we conspire to lose each year – something in the region of $160 billion a year in the US alone (see: The 160 Billion Dollar Bezzle). Now a UK writer has looked at what this means for us as individuals. The answer is, very roughly, a cost of 6% a year.
ASSET CLASS VIEWS
The Market Equilibrium Puzzle – Macro and Cheese
What is the stock market worth, and what will it be worth going forward? As a reference point, let's compare the S&P 500 today with its value back at the high, in 2007.
Trouble In Stocks, Focus On Commodities – The Short Side of The Long
We are in a "Late Expansion" of the investment cycle. I think there are cracks starting to show within the equity market, despite its potential to make new bull market highs above 1,420 in coming weeks.
What Do Metal Prices Tell Us About The Future Of The Stock Market? – ZH
As the following chart from Morgan Stanley indicates, metal prices tend to be a good predictive indicator of global industrial production. The disturbing finding is that on a year over year basis, metal prices have just gone materially negative for the first time since the Great Financial Crisis,
“Any old map will do” meets “God is in every leaf of every tree” – Andrew Gelman
As a statistician I am particularly worried about the rhetorical power of anecdotes (even though I use them in my own reasoning; see discussion below). But much can be learned from a true anecdote. The ough edges—the places where the anecdote doesn’t fit your thesis—these are where you learn.
Confusing Statistical Term #6: Factor – The Analysis Factor
Factor is confusing much in the same way as hierarchical and beta, because it too has different meanings in different contexts. Factor might be a little worse, though, because its meanings are related.
Miller, Mathematics and Statistics for Financial Risk Management – Reading The Markets
Although this book carefully and clearly explains the basic math and statistics at the heart of risk management, it does more. It also uses math and statistics to explain the shortcomings of some financial risk management tools.
Data and visualization blogs worth following – FlowingData
Credit Suisse: Making Fat Tails Work for You – All About Alpha
Both theory and empirical evidence on the success of certain “modified risk techniques” show that they can do what they are designed to do. They can accommodate fat tail events and diversify a portfolio’s sources of return.
Absolute vs. relative volatility of rates – Sober Look
Risk measurement models often attempt to project the behavior of the yield curve based on historical rate movements. But the assumptions that go into such modeling could often produce misleading results. Here is why.
Risk Premia Harvesting Through Momentum – Optimal Momentum (pdf)
…what makes it most effective. We do this first by introducing a hurdle rate filter before we can initiate long positions. This ensures that momentum exists on both an absolute and relative basis and allows momentum to function as a tactical overlay. We then explore the factor most rewarded by momentum - extreme past returns, i.e., price volatility. We identify high volatility through the paired risk premiums in foreign/U.S. equities, high yield/credit bonds, equity/mortgage REITs, and gold/Treasury bonds. Using modules of asset pairs as building blocks lets us isolate volatility related risk factors and use momentum to effectively harvest risk premium profits.
Momentum Crashes Revisited – Optimal Momentum
Volatility based position sizing is similar to risk parity and is related to mean variance portfolio sizing. I researched this topic myself last year with respect to multi-asset momentum portfolios and rejected volatility sizing for several reasons.
Five Hedge Fund Managers Who Lost Their Superstar Status – Institutional Investor
External auditor: 'Nobody at a bank can have a complete overview any more' – The Guardian
Are banks' accounts too complex to oversee? An external auditor talks to Joris Luyendijk about understanding true risks
Restructurer: 'I have had stones thrown at me' – The Guardian
Joris meets a restructurer who sees his job as repairing companies that saddled themselves with debt in good times
“How to Lie with Statistics” guy worked for the tobacco industry to mock studies of the risks of smoking statistics – Andrew Gelman
The great divide – The Economist
Why American house prices have corrected more than those in Europe: American banks had poorer lending standards and have been quicker to foreclose on properties; borrowers have been readier to walk away from their homes. In European countries, owners have been able to sit tight in the hope that prices will recover... Europe is going in the same direction as America. It is just getting there more slowly.
Bringing It All Back Home – Project Syndicate
Howard Davies: Global policymakers regularly congratulate themselves on having avoided the policy errors of the 1930’s during the financial crisis that began in 2008.
Four Fiscal Charts – Krugman / NYT
the reality is that we have deficits because the economy is depressed, but relative to previous policy we’ve been imposing fiscal austerity, not stimulus.
When Fundamentals No Longer Apply, Review the Fundamentals – Sprott Asset Management
Roundup of themes from US housing, Spain, IMF, BRICs
Productivity in the Euro area: any evidence of convergence? – ECB (pdf)
working paper by David Sondermann
How to Compete in Europe – Project Syndicate
Philippe Maystadt: competition and intangible capital
A World of Convergence – Project Syndicate
Kemal Derviş: “Catching up” is easier than leading the way. But there is still room for 10-20 years of “catching up”,
NGDP Targeting: Some Questions – MacroMania
The potential of NGDP targeting – Macro Matters
Not knowing the level of potential GDP actually makes NGDP targeting more reasonable
You will buy more Govvies, or else – alphaville / FT
Financial repression, or forced bond buys, is the most probable solution