Autocorrelations:
The investment world loves correlations. Option hedgers love correlations. Everyone loves correlations. Across assets. But how about across time, within the same asset? To what extent do the returns today depend on the returns yesterday, the month before, 3 months before or a year ago? Positive correlations with past returns are a sign of momentum, [...]

Quant Risk Management
Statistical or mathematical techniques have been used in investment management and finance to better understand risk but there are limitations, sometimes severe limitations. At the end of the day, there is no substitute for common sense and an understanding of the sometimes complex underlying drivers of price relationships that often become oversimplified in [...]

Equity Market Review
Once again equity markets are looking vulnerable. The high octane markets in Asia such as Shanghai, HK and Bombay have certainly corrected sharply, and this amid quite benign news. How do we make sense of these markets? The retail investor and, quite embarrassingly, the professional investor panicked in the second half of 2008. [...]

Japan’s quarter on quarter GDP growth recorded a 0.90% increase versus consensus estimates of 1.0% and a prior quarter’s alarming 3.8% decline. There are several ways to read this. One is that growth was positive on a quarterly basis and we should all be thankful for it, let’s all go and buy equities. The other [...]

Here is an analysis of the dispersion of returns in the various sectors of the European equity markets as defined by the Stoxx sub sector indices.
Dispersion here has been defined as the standard deviation of returns across the constituent stocks in a Stoxx sector index. I looked at 2 year daily data as well as [...]

See my earlier article A Return to Boom and Bust, where I argue that product and asset markets will be driven by liquidity and leverage and monetary policy in the short to medium term due to the extraordinary circumstances we find ourselves in in the aftermath of the bursting of the great credit bubble. Monetary [...]