Blogs / Analysis [Analysis Blog]

Portfolio Analysis

When a fund manager makes a portfolio, he has ideas about individual positions and why he put those positions on.   But although each position may make sense by itself, the portfolio as a whole could be over-exposed to certain factors that the manager is not aware of. The portfolio below is a sample fund portfolio [...]

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Green Shoots

Much has been made recently of green shoots in the economy. Optimists point to the fact that the rate of decline – the ubiquitous “second derivative” – has turned positive, signaling that the economy is contracting at a slower rate. Pessimists would prefer to see a positive first derivative before accumulating risky assets. In this [...]

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Taylor Rule

The Taylor rule is a method for determining how much the Fed should raise or lower rates based on inflation and the difference between real and potential GDP (also known as the output gap). The underlying premise is that the Fed raises interest rates to curb high inflation and lowers interest rates to spur a [...]

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Yen Volatility

I was reading a blog entry by “Macro-Man” ( who noticed that despite the Yen being super strong, Yen volatility was relatively flat over the past few weeks: Because equity traders watch the yen, when volatility is coming off of the yen market, the appetite for risk is increasing, and the equity markets should mirror [...]

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Merton Model

This study explores an equity-factor based strategy that uses the spread between the Merton model equity implied credit spread and the five year CDS across names in the S&P500 index. It trades with the assumption that recently the credit markets are more accurately priced than the equity markets; therefore, a company with a CDS spread [...]

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Pairs Trading Strategy

In this study we explore a trading strategy that isolates pairs of instruments within a sector that are highly correlated. We enter a trade if the price paths of these instruments diverge, going long one instrument and short the other, with the assumption that their price paths will converge. We construct our strategy in four [...]

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Characteristics of “Junk” Rallies

A lot of people have been focused on what they called the “junk” characteristics of the stock market rally that began in March. The implication is that there was a massive short squeeze [?], which is another way of saying that too many people were positioned short the same unpopular stocks and then were forced [...]

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Investing in Cheap, Efficient Companies

In this blog post we explore a strategy that buys cheap companies with high return on assets. To measure the performance of this strategy we created an Index of such stocks and rebalanced it yearly, investing equally among the chosen stocks. In quantitative terms, the stocks we picked at each rebalance satisfied the following criteria: [...]

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