In capital markets investing, the greater fool theory states that an investor buying a risk asset, no matter its current valuation, can always find a “greater fool” to buy it later at a higher price. The theory rests on the subjectivity of valuations and the fact that beauty (the attractiveness of the investment) is always […]
While taking risks by not wearing a mask offered zero upside in 2020, taking sentiment-savvy risks with your portfolio delivered bigtime. Using the Qontigo Sector ROOF Scores, we developed a methodology to construct Risk-On and Risk-Off variants of the STOXX USA 500 index portfolio.
In the wake of failed last-minute talks between Britain and the European Union, both sides have now warned that a ‘no-deal’ Brexit is likely, despite a mutual commitment to continue negotiations. The pound is expected to take the brunt of any market reaction, but the impact on stock markets is less clear-cut. In this blog […]
The recent news of effective COVID-19 vaccines propelled global stock indices to record highs. With that news came a big “sector rotation”, from industries that had so far benefitted from the crisis (Health Care, Information Technology) back into those that had suffered most (Energy, Financials). We used Axioma’s new Factor-based Fixed Income Risk Model (FFIRM) […]
The US market soared in November, producing one of the highest monthly returns since at least 1982. With regard to factor returns, the month started out fairly slowly. But things changed on November 9, when it started to look like the pandemic could end someday. We wrote about the impact the news from Pfizer on […]
Many risk model users may prefer the simplicity of using a single model to evaluate the risks in their portfolios. A very broad model, however, may be misaligned with the portfolios, and therefore may miss some of the important nuances that can help risk estimates be more accurate, attribution more intuitive and most importantly drive […]
Ahead of the Qontigo Summit, Olivier d’Assier analyzes the cost of adapting a portfolio to meet global warming targets using a STOXX Paris-Aligned Benchmark index. The results show that an early but gradual transition can dramatically reduce the market impact and transaction costs.
In our November 10 blog post “Pfizer Vaccine Announcement Puts Momentum in the ICU” we showed that on November 9, many factors across multiple geographies produced returns that were two or more standard deviations away from their long-term averages. No factor’s returns were as outsized as Medium-Term Momentum’s, where the eight-to-10 factor standard deviation negative […]
November 9 was a profoundly bad day for Momentum. In most regions we cover closely, Momentum’s return for the day was between seven and 10 standard deviations below expectations, and the return was the worst of any day going back to 1999, according to Qontigo’s medium-horizon models. The year-to-date return for Momentum in the US went from positive to negative overnight, but remained positive in other regions, albeit far lower.
The US market saw an even stronger concentration in stocks recently, with FAANGs (Facebook, Amazon, Apple, Netflix and Google) accounting for 14% of the weight in the STOXX USA 900 on Oct. 9. Add Microsoft to the mix, and the six stocks made up 20% of the US index. Just since July, the aggregate weight of these six stocks increased by one percent in the US index.