Tag Archives: 2016

Nov 16, 2016

Back to Normal…Almost

It’s been a roller coaster week in the aftermath of the startling conclusion to the U.S. Presidential election on November 8, 2016.   As recently as a week before the election, equity markets were quite calm, although volatility levels recognized the possibility of a surprise Trump victory.  When that victory occurred, U.S. futures declined significantly before…

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Nov 9, 2016

Winners and Losers in Trump’s Electoral Surprise

Donald Trump’s unexpected success initially threatened to send the U.S. equity markets into steep decline.  Yet as I write, the S&P 500 has moved very little since yesterday’s close (it is up a little), while the VIX has fallen dramatically. So why (or how) has volatility remained so low this morning when everyone expected it to…

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Sep 6, 2016

Risk and Active Management

Regular readers of this blog will be familiar with industry-wide comparisons made between the returns of active funds and their passive equivalents.  Studies comparing the risk of active funds are rarer, but have the potential to provide actionable insights:  at the very least, examinations of fund risk can help to evaluate the a claim that active…

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Jun 29, 2016

Navigating Brexit

Despite some warnings from volatility gauges, the market had “priced in” a vote for remain from the UK’s population.  This has made for some dramatic headlines, and large movements since the vote to leave the EU was announced.  As the market scrambled to make sense of the political chaos, three key themes have emerged from the…

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Jun 2, 2016

Divining Brexit

The markets’ view of the pending British referendum on EU membership displays the hallmarks of a low probability, high impact event.  Correlations, and volatility expectations, are the key indicators. When macroeconomic risk is dominant, as a select few narratives come to preoccupy investors, correlations increase.  For example, in August and September 2015, markets worldwide were roiled…

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Apr 19, 2016

Who’s Afraid of a Carbon Tax?

As far as equity investors might experience them, the risks of a potential “carbon tax” are more easily fathomed than the rewards.  Emissions data are available for most large companies and – taking basic assumptions on the likely form of taxation – we can easily examine which market segments face the greater risks. Estimating The Impact…

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Apr 11, 2016

Who Fuelled the Oil Bonds Bubble?

It has become popular to blame passive investors and index funds for the recent rise (and fall) in prices for U.S. high yield bonds.  The thesis – placing passive investors as the culprit – goes as follows: There have been material, positive flows into passive bond funds, at the expense of active funds. Passive bond funds…

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Feb 26, 2016

Low Vol: A little goes a long way

We’ve written at length of the many historical benefits of the low volatility anomaly. The S&P 500 Low Volatility Index selects the 100 least- volatile members of the S&P 500 index; lacking any sector constraints, the index seeks to provide pure exposure to the low volatility factor. In doing this, it has experienced a large tracking…

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Feb 8, 2016

Volatility Rides Again

Global equity markets stumbled out of the gate in 2016, and still haven’t found their stride. Markets are experiencing an intense case of risk off sentiment, as investors flee from riskier assets in pursuit of safe havens. The yield of 10 year US Treasury Notes is down to less than 1.8%, while oft-maligned gold is…

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Jan 8, 2016

As goes the first week, so goes …

The world’s equity markets have encountered a rocky introduction to 2016; including the worst ever start for the Dow Jones Industrial Average (against a record that stretches back to 1897) and steep falls across developed and emerging markets.  Equity markets are down more or less everywhere, and in many cases materially so. What difference does…

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