Price and Volatility Jumps and Co-Jumps within and Across Asset Classes

As a result of the financial crisis of 2007–2008 and subsequent central banking decisions, the asset management industry changed its asset allocation choices. Asset managers are focusing their attention on the search for new asset classes by taking advantage of the new opportunities to capture risk premia with the aim of exceeding the returns given by traditional investments, including traded equities, fixed income securities, and cash. By doing so, they are trying to improve the selection of alternative assets, such as commodities that sometimes have relatively low correlations with traditional assets. The chapter begins by describing the principles of asset allocation, distinguishing between passive and active asset allocation, also focusing on beta and alternative beta. It then concentrates on how investors can gain exposure to commodities through different investment vehicles and strategies.

Download Full-text

Changing Capital Market Structure and Regulatory Challenges

The Oxford Handbook of Institutions of International Economic Governance and Market Regulation ◽

10.1093/oxfordhb/9780190900571.013.21 ◽

2019 ◽

Author(s):

Walter Mattli ◽

Miles Kellerman

Keyword(s):

Structural Development ◽

Industrialized Countries ◽

Negative Externalities ◽

Electronic Trading ◽

Global Capital ◽

Telecommunication Technology ◽

Stage Process ◽

Market Fragmentation ◽

Exchange Markets ◽

Asset Classes

Advances in telecommunication technology in the nineteenth century encouraged greater centralization of liquidity on single, dominant exchanges in most major industrialized countries. Electronic trading, in contrast, has precipitated increased market fragmentation, creating a host of new regulatory dilemmas. In an attempt to understand this phenomenon, this chapter proposes a two-stage process of market structural development in response to electronic trading. This process is then examined in equities and foreign exchange markets. Despite significant differences between these two asset classes, they have exhibited a remarkably similar pattern of disintermediation followed by reintermediation. This analysis is followed by a survey of recent regulatory approaches to mitigate the negative externalities associated with electronic trading. It concludes with a brief discussion on the future of market fragmentation and centralization in global capital markets.

Download Full-text

Can Economic Factors Improve Momentum Trading Strategies? The Case of Managed Futures during the COVID-19 Pandemic

Economies ◽

10.3390/economies9020086 ◽

2021 ◽

Vol 9 (2) ◽

pp. 86

Author(s):

Renata Guobužaitė ◽

Deimantė Teresienė

Keyword(s):

Financial Markets ◽

Risk Premium ◽

Trading Strategies ◽

Economic Factors ◽

Momentum Strategies ◽

New Approach ◽

Managed Futures ◽

Asset Classes ◽

Momentum Trading ◽

Insight Into

Systematic momentum trading is a prevalent risk premium strategy in different portfolios. This paper focuses on the performance of the managed futures strategy based on the momentum signal across different economic regimes, focusing on the COVID-19 pandemic period. COVID-19 had a solid but short-lived impact on financial markets, and therefore gives a unique insight into momentum strategies’ performance during such critical moments of market stress. We offer a new approach to implementing momentum strategies by adding macroeconomic variables to the model. We test a managed futures strategy’s performance with a well-diversified futures portfolio across different asset classes. The research concludes that constructing a portfolio based on academically/economically sound momentum signals with its allocation timing based on broader economic factors significantly improves managed futures strategies and adds significant diversification benefits to the investors’ portfolios.

Download Full-text