Applied Research

Markets recovered in Q4, and volatility fell for many, but predicted volatility ended the year in the top 15% of observations from the past 40 years in the US.

The ROOF portfolios use the sector ROOF Scores to construct sentiment-tracking portfolios designed to capture the returns from the implementation of a bullish or bearish strategy. For the second year in a row, constructing portfolios aligned with the overall negative sentiment in the market generated significant outperformance relative to ‘holding’ the benchmark portfolio or adopting a contrarian bullish strategy.

Market returns were negative in Q3, yet volatility fell from the end of Q2. Risk fell when markets rallied, but remained steady as they turned down. We found a number of drivers of the lower risk, which is unexpected. Some style indices’ active risk fell as well. Volatility turned back up in late September,

Conventional wisdom has it that higher interest rates make a currency more attractive to foreign investors, whereas a weaker exchange rate can be good news for export-oriented economies. Neither is true for the United Kingdom right now.

Our stress tests generated in Axioma Risk indicate that further rate hikes could mean even more bad news for stocks and bonds alike, even if, or rather because, they help bring down anticipated consumer-price growth.

Most markets fell and risk increased in Q2 and YTD. US (Large and Small Cap) had the most negative returns, but Australia and Canada experienced the largest increases in predicted volatility (although are still at the low end of the risk spectrum).

The ROOF portfolios use sector and style ROOF Scores to construct sentiment-tracking portfolios designed to capture the returns from the implementation of a bullish or bearish strategy. In a difficult first half of the year, aligning portfolios with the overall negative sentiment in the market generated significant outperformance relative to ‘holding’ the entire market or ignoring the average investor’s outlook.

The recent launch of the STOXX U.S. Equity Factor Index, which underlies the iShares U.S. Equity Factor ETF (LRGF), highlights the real-world performance benefits of a factor-based approach that seeks to manage risk relative to a capitalization-weighted benchmark.

Olivier d’Assier, Qontigo Head of APAC Applied Research, speaks in “Bloomberg Daybreak Asia” with Shery Ahn and Haidi Stroud-Watts. He says the message from central banks to investors is clear: “Help is definitely not coming”. He discusses how this will play out in the markets and other risks to sentiment.

Thematic ETFs have seen their biggest decline in assets globally, as assets plunged 6.9 per cent in Q1 driven by negative investment returns.

Olivier D’Assier, Head of Applied Research APAC at Qontigo joins CNBC to discuss the latest market events and how they impact Asian economies.

The devil is in the details when it comes to performance attribution. Here we explain the differences between risk-based vs. Brinson attribution and how using equity risk models can help you understand your drivers of portfolio risk and return.