Top Picks: Data, Models and Market Plumbing

20th September

Two great papers – one on modelling retail sales in almost real time and another on imperfect decision making.

From Transactions Data to Economic Statistics: Constructing Real-time, High-frequency, Geographic Measures of Consumer Spending (Federal Reserve) They find that daily retail transaction data from First Data Merchant Services can replicate monthly official retail sales data in almost real-time.

Modeling Imprecision in Perception, Valuation and Choice (Columbia, Michael Woodford) A piece on imprecise decision. It gives a summary of psychophysics which models the relationship between objective physical properties of a person’s environment and the way these are subjectively perceived.

 

13th September

Entrepreneurial Personalities (VOX) Finds that entrepreneurs have a higher tolerance for risk, stronger self-belief, sense of controlling one’s destiny and need for achievement than nono-founding CEOs, inventor employees and other employees.

New Index Tracks Trade Uncertainty Across the Globe (IMF) The Fund creates trade uncertainty indices for 143 countries starting in 1996.

Why We Should Care About Economic Uncertainty (Econlife) Describes some uncertainty indices and where to find them. They do impact growth.

Puzzling Exchange Rate Dynamics and Delayed Portfolio Adjustment (VOX) In theory, FX carry trades shouldn’t make money, so many ideas have emerged to explain this puzzle. This column argues that the slow response of investors to interest rate changes is the answer.

 

6th September

Predicting Returns with Text Data  (Ke, Kelly, Xiu, working paper) Outlines single stock trading strategy around text-mining newswires. The daily models deliver sharpe ratio of between and 1 and 2 (after t-costs). Impressive stats.

Replacing LIBOR (Money and Banking, 8 min read) LIBOR will cease at the end of 2021. This piece raises concerns around the lack of clarity around how many contracts referencing LIBOR have fallback language for the switch. Could pose a systemic risk at some point.

3 Shockers from Yesterday’s RPI Plans (M&G investments, 2 min read) UK inflation-linked bonds will soon RPI inflation measure to the CPI measure. Biggest shocker is that linkers maturing beyond 2030 are at risk of having RPI calculations changed at the discretion of statisticians not the Chancellor.

Satellite Data Economics, Night Lights, and More (Conversable Economist, 3 min read) Useful blog that touches on and contains references on how satellite data can be used to measure growth.

(The commentary contained in the above article does not constitute an offer or a solicitation, or a recommendation to implement or liquidate an investment or to carry out any other transaction. It should not be used as a basis for any investment decision or other decision. Any investment decision should be based on appropriate professional advice specific to your needs.)

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