| |Some may feel they are overloaded with news and it is just noise. Well, some new machine learning research suggests that following new is worth a second look. The news can provide a strong measure of sentiment that can improve forecasts versus using traditional fundamental information. This news sentiment is also unique and can add value versus survey sentiment information found in the long-serving Conference Board and University of Michigan work. This new research on sentiment is presented in the paper, “Measuring News Sentiment” from the Federal Reserve Bank of San Francisco … Read more News Sentiment – It is Worth Following
| |A key issue with asset allocation and risk parity is the changes in volatility across asset classes. The foundation for risk parity is based on equal weighing of asset classes volatility as opposed to setting dollar weighting. Hence, knowing the relative differences in volatility and how they move through time is critical. We can describe some of the key issues associated with any volatility matching or equalization strategy by taking at a quick look at the CBOE VIX index for equity volatility and the TYVIX for Treasury bond volatility. The simple case of comparing these two major assets classes helps to describe the problem of volatility matching … Read more Equity and Bond Volatility are Different – The Need for Broader Thinking
| |Asset allocation changes are often associated with the pain faced by investors. When there is financial pain through loses, allocations change, so it is important to know where are the pain points. Pain points can be associated with book value loses. Look at when money flowed into an asset class and the price associated with that flow … Read more Bond and Equity Flows -Who is Underwater?
| |Earlier this month, BlackRock reported their institutional investor survey findings taken from late last year. The results are not that surprising if you believe that inflation may be rising and there is still a need for yield. Cash levels are expected to decline along with fixed income, but real estate will see a large boost. Investors will reduce public equity exposure, but increase their exposure to private equity. There is a bias to less liquid higher risky assets. What may catch some by surprise is the large increase in allocations to real assets which includes timber, commodities, infrastructure, and farmland … Read more BlackRock Survey – Investors Will Pour Into Real Assets
| |There has been increased interest in commodities and real assets with the increase in inflation. Commodity price as measured by the Bloomberg commodity are off the lows since February of last year, but he markets are still digesting the adjustments in demand and supply since the Great Financial Crisis. Most markets are still in contango because of high inventory levels. These contango levels have fallen over the last year, but are not like the long periods of backwardation during the 90’s and commodity super cycle. This places a significant roll drag on performance for pension funds that may choose to buy an index. … Read more Contango Still Dominates the Commodity Markets
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