This week, we did some exploratory work on the pair-wise correlation of index constituents. Turns out, high correlation environments are pretty sticky.
You can read about it here. What do you think?
Markets this Week
More here: country ETFs, fixed income, currencies and commodities.
Links
Research
0DTE Option Pricing (SSRN)
Based on a unique arrangement of trading and disclosure times around earnings announcements in the Chinese stock market, we provide evidence of a striking overnight-intraday disparity in terms of the reaction to earnings news. Specifically, we find that the overnight period exhibits a strong and consistent reaction to earnings announcements, whereas the intraday period trades against both the earnings news and the prior market reaction during the overnight period.
Technical analysis and trading are very popular among people who have low financial literacy and irrational high return expectations. (SSRN)
Investing
Infosys cuts FY revenue growth outlook as clients cut spending (reuters).
The lost returns from listening to esteemed, perennial doomsayers:
Valuations may never mean-revert (ofdollarsanddata).
Using the data available to you in real time, it's very difficult to construct a valuation-based trading strategy that beats buy and hold. You only know the obvious extremes after the fact. Someone who tried to fade the dot-com bubble based on a mechanical mean-reversion strategy would've gotten blown out and underperformed for years.
Economy
China is known for exporting manufacturing products to the world. It may soon develop the reputation of exporting something else, producer deflation--the falling of wholesale prices. (ibtimes)
Indian traders have been scooping up Chinese steel at a deep discount, spooking Indian producers ahead of a seasonal pick up in domestic demand. (reuters)
An increasing number of Chinese nationals are making the 2,300 mile (3,700 km) irregular journey overland to the U.S.- Mexico border after flying to Ecuador, where they can enter without a visa. (reuters)
Canada’s new program to entice H-1B visa holders to the country attracted so many applications that the 10,000 limit was reached in less than 48 hours. (forbes)
Europeans are becoming poorer. With consumption spending in free fall, Europe tipped into recession at the start of the year, reinforcing a sense of relative economic, political and military decline that kicked in at the start of the century. (wsj)
What is going on with Indian drugs? Eyedrops making people blind (nbcnews). Cough syrups killing kids in Gambia (reuters) and Uzbekistan (livemint). If this is “Export Quality” then what are they feeding us?
Odds & Ends
Fable, a San Francisco startup running a big project dubbed The Simulation, has released Showrunner AI technology, dubbed SHOW-1, which can generate new episodes of TV shows with you as the star. (venturebeat)
Meme of the Week
