Key Points: Many investment strategies offer exposure to the stock market in complex packages, leading to similar risk exposures across different products. An analysis of the iMGP DBi Hedge Strategy ETF found that a combination of the S&P 500 and cash could have replicated its performance with the same level of risk. Long-short equity hedge funds can be replicated with … Read More
Stock market returns on days when the last five Federal Reserve chairs testified before Congress were analyzed. Janet Yellen generated the most positive returns, while Ben Bernanke and Jerome Powell’s testimony was associated with more negative returns. Bond returns were negative on days when Yellen testified, indicating a different trend compared to equities. Yellen had the least volatility in stock … Read More
Key Points: The global asset management community is increasingly focused on ESG investing. Asset managers expect ESG criteria to play a greater role in portfolio construction and management in the coming decade. Climate is still the top environmental factor, but asset managers are broadening their scope of ESG considerations. Asset managers recognize the need for better data and metrics in … Read More
Key Points: – Markets have been buoyant in June and July, but certain areas have advanced beyond what the fundamentals justify. – Despite an overall fully priced market, there are still attractive individual opportunities for those willing to search. – The US high yield market has broken through the low 400 bp range, but this may signal an overextended market … Read More
Key Points: Individual investors now have access to direct real estate investments, but it’s important to understand the outlook for different sectors in the US commercial real estate (CRE) market. Residential multifamily properties are in high demand due to a housing unit shortfall, rising housing prices, and affordability challenges. This presents an opportunity for rental properties, including single-family rentals and … Read More
Key Points: The book “The Power of Money” by Paul Sheard offers a fresh perspective on money and its impact on society. Sheard explains the misconceptions about government debt, emphasizing that it is not the same as personal debt. The author explores various topics related to money, including bank runs, financial crises, wealth inequality, and cryptocurrencies. The euro sovereign debt … Read More
Key Points: – Fitch Ratings’ downgrade of US sovereign credit from AAA to AA+ highlights the principal-agent problem in financial markets. – Investors have outsourced their risk management to rating agencies, but the problem goes beyond just risk management. – The complexity of the financial system has been moved somewhere else, and it’s important to understand who is managing it. … Read More
Can stock investors benefit from corporate bond market data? Yes. In fact, equity portfolios constructed using bond momentum signals may outperform their traditional equity price momentum counterparts. But as our study demonstrates, the signal design is critical. Momentum Spillover The momentum spillover effect describes the signal that a company’s bond momentum sends about its future stock returns and is attributed … Read More
Key Points: Equity factors play a crucial role in a goals-based investment approach Factors such as Small Minus Big (SMB), High Minus Low (HML), Robust Minus Weak (RMW), and Conservative Minus Aggressive (CMA) can contribute to growth, income, preservation, and liquidity goals Factors have different correlations with market returns and macroeconomic conditions Convexity and skewness of factors can determine their … Read More
Key Points: Perfect competition is a myth and does not exist in real-world markets. The assumptions of perfect competition, such as homogeneous products and perfect information, are not valid. Oligopolistic behavior and monopolies are common in various industries. Free markets tend to lead to consolidation and monopolization, rather than promoting competition. The pursuit of self-interest in markets can create negative … Read More