Bond Risk Under Uncertainty: Pricing Macroeconomic Shocks
Macroeconomic uncertainty isn’t just noise—it reshapes bond risk premia and pricing.
Risk Premia
Capturing persistent risk-return trade-offs, such as carry and volatility risk premium.
Latest posts — page 2
Tail Risk Premium: A Better Predictor of Market Returns
This paper shows that the part of the variance risk premium tied to downside tail risk—jumps in asset prices—is what really predicts market returns. It's a cleaner measure of investor fear than the VIX.
Premium for Uncertainty: The FOMC Puzzle Explained
It’s not volatility, but the anticipation of risk that drives returns. This paper shows how timing macro events reveals the hidden premium of uncertainty.
Bitcoin in Portfolios: Diversification Without Borders?
Bitcoin’s extreme volatility comes with an upside: low correlation with other assets. This paper shows that even a small allocation to Bitcoin can significantly boost the Sharpe ratio of a diversified portfolio.
How Financial Distress Impacts Commodity Markets: Lessons from Risk Flows
During financial crises, hedge funds and commodity index traders (CITs) offload positions as volatility rises, forcing commercial hedgers to absorb risk. This “risk convection” disrupts markets, creating trading opportunities based on liquidity shifts.
Basis-Momentum: A Powerful Predictor for Commodity Returns
Performance * Basis-momentum is the strongest predictor of commodity returns, outperforming traditional factors like basis and momentum. * A long-short strategy based on basis-momentum earns an 18.38% annualized return with a Sharpe ratio of 0.9. * The strategy captures both spot
Decoding Gold’s Risk Premium: What Drives Gold Returns?
Gold’s returns are predictable using volatility and risk factors, but it doesn’t always act as a safe haven or inflation hedge. Instead, gold moves with stocks and bonds, though its actual returns can diverge in crises.
Predicting Commodity Markets: Lessons from 140 Years of Data
The study finds that inflation and industrial growth predict commodity prices, while stocks lead commodities by a month in downturns. Futures trading makes markets more efficient but increases volatility after introduction and during crises.
Decoding Treasury Bond Returns
Want better bond return forecasts? This paper finds a new factor that improves risk premium estimates, making Treasury bond investing more precise.
Do stocks outperform Treasury bills?
Less than 43% of stocks beat Treasury bills, and just 4% account for all market gains. 🚀📊
Investor Inattention and Market Anomalies: How Media Coverage Drives Mispricing
Taking advantage of limited attention in anomaly trading: The average Sharpe ratio documented in the paper is 1.09 (min: 0.62 ROE, max: 4.45 MOM). Top anomalies: MOM (4.45), ROA (2.40), PEAD (1.60), PERF (1.68)—all stronger in low media coverage stocks.