Browsing: Business News

By Nicolas Rabener, CAIA, Factor Research & Karl Rogers, ACE Capital Investments INTRODUCTION Anyone who has watched the hit TV show “Billions” will have noticed that the hedge fund billionaire Bobby Axelrod and his former lieutenant, and occasional nemesis, Taylor Mason have totally different trading styles. Bobby, although mathematically gifted,Read More

By Rick Roche, CAIA, Little Harbor Advisors, LLC Part 2 of a two-part series on The Alternative Imperative in the COVID Era. In Part 2, the author tackles notorious technology laggards. This piece transitions to alternative data pioneers (Alt-Venturers) and the 4-1-1 on Alt-Data: Hype or Hope? The author dispelsRead More

By Rick Roche, CAIA, Managing Director of Little Harbor Advisors, LLC Part 1 of a two-part series on Alternative Investment Data (Alt-Data) in the COVID Era. In Part 1, the author makes the case for high-frequency, short-interval Alt-Data while discussing three primary drawbacks of interpreting official economic statistics amid aRead More

By Bill Kelly, CAIA Association CEO Pictured above is the bust and the borrowed line of Juvenal, a Roman poet from the late first century. His cynical reference to bread and circuses was simply to say: feed and entertain the masses and they will forget what they wanted in the first place. The announcement this week from the SEC regarding their final ruling on amendments to the definition ofRead More

There has been a lot of commentary in the financial press about the idea of “fat tails,” that is, about the idea that disasters are more common than a normal or bell curve view of probability would lead one to expect. Indeed, one might even say that there is someRead More

By Dr. Mehrzad Mahdavi, Executive Director, CEO Financial Data Professionals Institute According to a recent WSJ article, (subscription required) many companies have just discovered that AI is not some kind of magic sauce that could be poured over any business process to transform it into a moneymaking machin. The article also points outRead More

A co-founder of Quantigic Solutions has presented what he calls “the freshmanlevel” answer to the question: why did dollar-neutral quant trading strategies, such as equities stat arb, fail so markedly during the COVID-19 market sell-off? Zura Kakushadze, a professor at the Free University of Tblisi, is on reasonably solid groundRead More

The FICC Market Standards Board Ltd. (FMSB) is a London-based standards body for participants in the wholesale fixed income, currencies, and commodities (FICC) markets. It has been looking into the root causes of market misconduct, and pursuant to that research it recently published a report on the “themes and challenges”Read More

Keith Black, PhD, CFA, CAIA, FDP, Managing Director of Content Strategy, CAIA Association Michael Oliver Weinberg and Peter Strikwerda work at the Dutch pension fund APG and serve as the head of hedge funds and alternative alpha and the global head of digital and innovation, respectively. CAIA Association and FDPRead More

Keith Black, PhD, CFA, CAIA, FDP, Managing Director of Content Strategy, CAIA Association “Building your dream has to start now There’s no other road to take You won’t make a mistake I’ll be guiding you You have to believe we are magic Nothin’ can stand in our way” – OliviaRead More

Three scholars affiliated with University College London have posted a paper on the dangers that increasingly sophisticated algorithms pose for markets, employing a fascinating analogy from paleontology. But we begin with their big picture. The authors are concerned that in the near future an “ecology of trading algorithms across differentRead More

A recent MIT Sloan research paper looks at the degree to which various environmental, social, and governance (ESG) ratings diverge and why. The paper is the work of Florian Berg and Roberto Rigobon, both of MIT Sloan, and Julian F. Kolbel, who is affiliated with the University of Zurich’s departmentRead More

A long-running drama continues over Xerox’ desire to buy HP. Xerox upped the ante early in the new year, announcing that it has secured binding financing commitments in the amount of $24 million. The dispute, with long-time shareholder activist Carl Icahn at its center, shows that: (a) the corporate worldRead More

By Bill Kelly, CEO, CAIA Association As a global organization, it is pleasing to know there is always a CAIA Association Member, somewhere in the world, enjoying the dog days of summer. Although we can’t get Portfolio Management Research to recognize the Southern Hemisphere of seasons on the cover ofRead More

A new year ushers in new opportunities and 2020 is no different in that respect. Emerging markets debt is one such opportunity, according to the global fixed-income team at Morgan Stanley Investment Management. In its new report, MSIM sees “attractive opportunities in countries displaying disinflationary or stable inflation dynamics andRead More

Until the final days of 2019, it has been a quiet year for high-frequency trading-related news. The whole concept of a trade executed in nanoseconds, and the related concept of a trading program managed with only sporadic human intervention or oversight, have all faded into background assumptions. What remains isRead More

There has been little “news” about high frequency trading in 2019. On the one hand that silence, as a certain famous detective might say, is “the curious incident.” On the other hand, the period of silence, like the year 2019 itself, may be ending. To get to both points, weRead More

Disruption is the trend of the moment in many industries and the investment world is no exception. Deloitte Insights has just posted an article that takes a comprehensive look at the investment world today, traditional and alternative. Its theme is that this world is in search of new leadership andRead More

The phrase “books and records” hardly suggests excitement. Yet, the cliched corporate lawyers’ phrase is not without payoff, either. Activist hedge funds are always interested in ammunition that will help them shake up entrenched managements and unlock value. The question often arises during the resultant fights: when does an activist/dissidentRead More

Machine learning as a way of managing a portfolio is a “wave of the future” with a lot of sea to cover before it breaks on the shore. Meson Capital Partners has sent its investors an update and summary for 2019 Q3 regarding its managed market neutral fund, and thisRead More

The term “greater fool theory” refers to the many circumstances in which speculators buy a (potentially) productive asset, basing their buy decision not on the asset’s operational value, but on the notion that there is a “greater fool” out there who will pay even more. The term refers, then, toRead More

A recent publication from Fidelity Institutional Asset Management, while looking at the money markets in the US, emphasizes that investors are looking for liquidity. The report, written by Kerry Pope and Chris Lewis, each an institutional portfolio manager with FIAM, begins with a discussion of the Federal Reserve’s September rateRead More

In  a new report, Pitchbook looks at the mergers and acquisitions trends in Europe. In 2019 through September, the value of European M&A is lower than it has been since 2014, and the volume is lower than it has been since 2010. Only two sectors did not see year-on-year declinesRead More

Larry Tabb, in a piece in the Financial Times, has defended the controversial practice of payment for order flow (PFOF). Let’s start with PFOF and why it’s controversial. The UK’s Financial Conduct Authority defined PFOF in a recent white paper as the practice in which an investment firm, typically aRead More

Since, as everyone says, “past performance is no guarantee of future results,” a history of close correlation between two assets, or between a single asset and a benchmark, is no guarantee of future correlation. The threat that a correlation upon which a particular investor has relied will cease to applyRead More

By Bill Kelly, CEO, CAIA Association The saying “fool me once shame on you, fool me twice shame on me” has its origins all the way back to the 1600’s when most of the carbon now in our atmosphere was “safely” encased in limestone and other rock formations within theRead More

Last month saw an extraordinary spike in the interest rates of the repo market—the market that consists of the (very) short-term, usually the overnight, borrowing of government securities. Hedge funds, along with other institutions such as trading firms and banks, regularly hand over US Treasury bills and the like inRead More

By Bill Kelly, CEO, CAIA Association How do you turn a millennial into a capitalist? Sell her SNAP in the post-IPO market. A little hindsight here shows how ridiculous this all looked. The initial sellers of the shares were the founders and their VCs (just under 30% of the offering),Read More

One regular theme of coverage and analysis that involves the listed equities, including analysis of the pursuit of alpha, is that many of the users of these markets claim, often quite obstreperously, that the exchanges charge more than makes sense and some restructuring of the industry is in order. TheRead More

David Stevenson, a US District Court Judge for the Northern District of Texas, has presented his analysis of the  differences between the law in the United Kingdom and the United States concerning “a debtor’s ability to approve a restructuring arrangement over the objection of creditors that disapprove.” This is moreRead More

By Nicolas Rabener of FactorResearch (@FactorResearch) INTRODUCTION When pitching an investment product with a backtested history the frequent response from potential investors is that they have never seen a bad backtest. Naturally this is true as there is no point in marketing a strategy with a poor backtest as investorsRead More

The Securities and Exchange Commission issued three no-action letters on the issue of research payments, in light of developments on that issue in Europe in 2017. Specifically, they dealt with the cross-border of Europe’s rules (MiFID II), which were scheduled to take effect, and which did take effect, on Jan.Read More

A lot of hopes have been placed on changes in market tick sizes. In the 1990s there was a big push to reduce the tick sizes of securities, allowing them to get down to one cent or fractions thereof. In the new millennium came a sense of regret. Observers suspectedRead More

There are reports that Google is preparing an announcement of “quantum supremacy” for later this year. If true, this is the biggest tech story since the transistor replaced vacuum tubes. It could be a disruptive development for just about every business with an IT department. Among much else, quantum supremacyRead More

On Feb. 1, ICE Futures US Inc., informed the Commodity Futures Trading Commission that it was instituting a new “speed bump,” formally called the Passive Order Protection (or POP) Functionality for its gold daily and silver daily futures markets. The idea of POP is to limit the advantage that canRead More

By Mark Shore As the discussions of trade wars and tariffs persisted throughout 2018 and into 2019, it may have influenced a sense of uncertainty in the global financial and commodity markets as companies might have to rethink their supply chains and manage potential disruptions and at least in theRead More

Three scholars associated with the University of Wollogong, Australia, recently published a paper on the contribution of high-frequency traders to the absorption of new information by the markets, especially in relation to the prices of interest rate derivatives. The study is the work of Alex Frino, Michael Garcia, and IvyRead More

The Securities and Exchange Commission recently imposed a stay on part of its transaction fee pilot (TFP). There is understandably a good deal of debate about the significance of this stay. The TFP, initiated in December 2018 with the expectation that it would run for at least one year, andRead More

Many high-frequency trading (HFT) firms have disappeared into larger firms as merger activity has increased recently. Those acquired include Chopper, Infinium, Teza, RGM Advisors, and Sun Trading. It also includes Getco, the Chicago-based firm founded in 1999 by two former floor traders that almost defined the field for some time.Read More

Two scholars working with Bayesian probability theory recently published a fascinating discussion of market timing and portfolio efficiency. They have proposed what they call a “hierarchical ensemble learning portfolio.” Yes, that sounds rather heavy on the jargon. We’ll break it down a bit in what follows. The authors of theRead More

Algorithmic trading may fairly be said to have conquered the public equities world, although there are still pockets of resistance and related controversies. The robots have now turned their attention to the bond markets. Bond markets are different from stock markets in a lot of ways, and many of theseRead More

The NYSE, on Thursday, Feb. 14, Nasdaq, and Cboe Global Markets (the following day) have united to bring lawsuits against the Securities and Exchange Commission to stop its transaction fee pilot. These are the three largest US equity exchanges and their attitude toward their regulator is usually one of cooperation.Read More

A sound “portfolio optimization strategy” is one that takes into consideration how its assets are behaving in the bad times, those that represent the left-side tail of the bell curve. This is not all that novel an idea, but Maria Kartsakli and Felix Schlumpf, Zurich Insurance Company executives, give itRead More

It was just about 10 years ago (Dec. 10, 2008) that Bernie Madoff acknowledged to his sons, Mark and Andrew, that he had “absolutely nothing left” of the funds that had been entrusted to him; that the investment fund that bore his name was “just one big lie.” There isRead More

A new paper in the Journal of Business, Entrepreneurship, and the Law looks at the “Brokaw bill” of 2016 and at the facts said to have motivated it. This turns out to be an object lesson in how scary hedge funds, especially activist hedge funds, look to legislators, and theRead More

Glassbridge has put out an ambitious white paper about the “evolution of asset allocation across the investment management industry,” one that begins with the basics of the Capital Asset Pricing Model and ends with quantitative analysis and crowdsourcing. The premise is that new strategies, and new ranges of data, areRead More

The Principal Traders Group of the Futures Industry Association (FIA PTG) recently offered its thoughts on market structure, outlining one direction of reform for the Securities and Exchange Commission’s Reg NMS. Reg NMS (National Market System) was promulgated in 2005, in order to ensure competition among markets, and in theRead More

Christina Zhu, of the University of Pennsylvania, in a recent paper, looks at the consequences of Big Data for corporate management. What “Big Data” means depends on who is talking or writing about it. For economists working within the classic microeconomic framework, it means a drastic fall in the cost of acquiring information.Read More

A new study prepared for the Federal Reserve Board looks at the use of algorithms to read and interpret financial news. While there have been a lot of studies that have looked at this topic, one unique feature of this new paper, “First to ‘Read’ the News,” is that itRead More

Herbert Stein, who was President Richard Nixon’s chairman of the Counsel of Economic Advisors, is often quoted as saying, “If something cannot go on forever, it will stop.” This statement, known as “Stein’s Law,” has the right ring of profundity about it, a mixture of tautology and empirically verifiable generalization.Read More