Applied Research

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.

Much has been written about the spectacular comeback of Value stocks. But has this also been reflected in the credit market? The steep rise of the Value factor from the Axioma Factor-based Fixed Income Risk Model over the past 14 months seems to suggest that the answer is yes.

The FAANGs (Facebook, Amazon, Apple, Netflix, and Google) were the market darlings of the COVID-19 Pandemic, attaining almost cult-like status with investors in 2020. Only Microsoft and Tesla came close to winning such adulation.

After experiencing a period of steadily rising returns from 1982 through 2006, investing in “cheap” stocks has been out of favor since 2007. Granted, a few good quarters for the Value factor have popped up every now and again, but so have strings of poor performance, yielding a return of roughly 0% over the 13-year period ended September 2020.

In Q1, most markets continued to build on the gains achieved in 2020, while risk changes were mixed across regions.

The first quarter of 2021 provides an excellent opportunity to see how investor sentiment—as measured by the Sector ROOF ratio—can be leveraged in a market under a rotation scenario.

Foreign-exchange rates can be very volatile. Investors looking to bet on markets outside their own base currency must decide whether to embrace or mitigate the additional risk. In this paper, we propose a stress-testing framework that can help investors with the decision whether “to hedge or not to hedge”, given their assumptions on expected returns and cross-asset correlations.

In this research piece, we demonstrate the value of the Axioma Worldwide Equity Linked Factor Risk Model (WWLM4-MH or ‘Global Linked Model’) for solving two very common analytical problems when managing global portfolios. Global equity mandates are often broken into specialist mandates segregated by geography.

The recent release of the Axioma Macroeconomic Projection Equity Factor Risk Model highlights the risk and return impact of economic variables on equity strategies. Quantitatively driven portfolios are usually constructed (and invested in) without considering the potential impact of big moves in economic variables.

Rising interest rates are customarily accompanied by gains in stock prices and increasing consumer prices, which are usually seen as signs of a healthy, growing economy. There may come a point, however, when (expected) inflation becomes so high that the central bank may feel compelled to tighten monetary conditions.

Dividend Yield strategies are starting to stage a comeback, no thanks to European banks. After banks stopped paying dividends and exited the STOXX Europe Select Dividend 30 index, the index saw large changes in its profile, with Real Estate contributing the largest proportion of dividend yield to the index, followed by Insurance. The tracking error […]

The macroeconomy has dominated financial news in recent weeks, driven in no small part by the specter of rising inflation. In a fortunate coincidence, Qontigo has just released the new Axioma Macroeconomic Projection Equity Factor Risk Model (WWMP4).