Applied Research

While the US market has hit multiple record highs in 2021, investor sentiment thus far has been more negative than positive.

As purveyors of risk models, we spend much of our time immersed in the arcana of causes and implications of volatility. But we are often asked why investors should care about volatility (aka risk) and, in particular, if higher volatility drives higher returns, why is low volatility viewed as a positive market characteristic? Below, we illustrate the connection between volatility and investors’ perceptions of potential capital losses, which may color their decision to invest.

Risk fell again across most indices in Q2 – US short horizon risk finally retraced its path back to where it stood before the 2020 crisis. Almost all components of risk contributed to the decline.

In this article we examine stress-test results to determine the ex-ante performance impact of the variables in the Axioma Worldwide Macroeconomic Projection Equity Factor Risk Model (Macro Model).

The STOXX® USA 500 ESG Broad Market, ESG Target, and ESG Target TE indices aim to provide alternatives for index investors and product issuers who are looking to switch to more sustainable versions of traditional benchmarks.

Over time, market-moving events generate either more need or want for portfolio rebalancing. Using each metric’s contribution to the overall market ROOF scores, we can track the motivational nature of the aggregate market move each day (i.e., are they driven by want or need?).

Share prices continued to climb to record highs, despite another surge in US consumer prices. This may seem counterintuitive, but a comparison with the aftermath of the global financial crisis reveals that it may not be that unusual after all. At the same time, history also indicates that there could still be choppy times ahead—especially for the Energy, Materials, and Industrials sectors, which are likely to be adversely affected by falling prices for commodities and consumer goods.

In this paper we attempt to answer the following questions: in which region can you make the most impact, and how much active risk is required to achieve your climate goals?

Credit risk premia have been at pre-crisis levels for a couple of months now, and so has predicted risk for corporate bond portfolios. Low spread volatility and the recent surge in sovereign yields means that risk-free interest rates have once more become the dominant return driver for investment-grade securities.

While sustainable investing is not a new concept, its growing popularity means a sharper focus is needed on how to achieve sustainability goals without sacrificing returns or taking on too much unintended risk.

ESG integration, sustainability, and impact investing…While there may be overlap in the meanings of these terms, they each represent a distinct approach to “doing well while doing good” in investor portfolios.

Standalone equity volatility in Qontigo’s global multi-asset class model portfolio has dropped by a third since the beginning of February—yet the current predicted risk for the total portfolio of 6.6% is only marginally lower than the 7.2% of 11 weeks ago. The main reasons for this are that share and bond prices are no longer negatively correlated, while the recent dollar weakening has once more amplified the returns of non-US stocks.