Before going off on holiday, we published our experience using Facebook’s Prophet library to predict VIX (Prophet for VIX). Turns out, its marginally better than GARCH(1,1) but worse than just extending the last value out?
Approaches to most problems in statistics have multiple models. And every model involves tradeoffs. There is no point getting religious about them. Always default to the simplest and when in doubt, average out the outputs of multiple models.
Markets this Week
I can’t believe that we ended the week in positive territory…
More here: country ETFs, fixed income, currencies and commodities.
Links
Research
Cross-Country Factor Momentum (SSRN)
We document a persistent international pattern: factors in winning countries consistently outperform those in losing countries. The effect holds across most anomalies and is robust to many considerations.
Life-cycle Forces make Monetary Policy Transmission Wealth-centric (NBER)
As retirement preoccupations strengthen, the potency of conventional monetary policy declines and depends more on the response of asset prices. Being explicit about the role of retirement savings in aggregate demand therefore offers new perspectives on several aspects of monetary interventions.
Market returns surrounding the disclosure of politician stock purchases (wiley)
We examine stock purchases of the members of the U.S. Senate for years 2012–2020 and find that stock purchases by senate members generate abnormal returns. We also find that abnormal returns are higher if the senator has direct jurisdiction over the firm through committee assignments. We see an increase in abnormal returns if the firm is tied to the member of the U.S. Senate through lobbying-sponsored legislation and political action committee contributions. We also find that stocks both purchased and sold by senators experience negative abnormal returns over the 6–12 months following the transaction date.
Gender-Specific Transportation Costs and Female Time Use (NBER)
We observe decreased bus expenses and time saved on travel. Skilled employed women increase labor supply, while low-skill married women shift focus to household chores. Unemployed women intensify job searches, yet overall employment rates remain unchanged. Our findings highlight that alleviating commuting costs does not uniformly boost women’s labor participation, as gender roles and societal norms continue to shape outcomes.
The Price of Nails since 1695 (aeaweb)
Economy & Investing
Comparative versus competitive advantage (peofdev)
Running a very concentrated investment strategy places an incredibly heavy onus on being right and also leaves us acutely vulnerable to unforeseen events unfolding that can have profoundly negative consequences. Exposing ourselves to such risks wilfully seems imprudent and unnecessary.
The Problem with Concentrated Funds (behaviouralinvestment)
India
India's state sector is thriving but that’s not good news for the economy (livemint)
We are slowly reaching broker singularity: Pay-out of securities directly to client demat account (sebi). In the end, brokers will end up being glorified KYC agents of stock exchanges.
Stocks under Modi 3.0 off to a rocky start. FIIs sold $3 billion between Tuesday-Thursday. However, they have been selling since April. Indian investors continue to pour money into domestic stocks.
U.S. Steel Tariffs Send Shockwaves Through Indian Steel Industry (oilprice)
The great Himalayan tragedy (tribuneindia)
ROW
Berkshire Hathaway controls 3% of the entire T-bill market. That’s $158 billion in total (marketwatch).
Zombie numbers have soared to nearly 7,000 publicly traded companies around the world. And now many of these mostly small and mid-sized walking wounded could soon be facing their day of reckoning, with due dates looming on hundreds of billions of dollars of loans they may not be able to pay back (apnews).
No, trade surpluses aren’t caused by comparative advantage (ft)
The West’s decision to pursue neoliberal economic policies was a strategic mistake, which led to the de-industrialisation of their economies and provided China with an opportunity.
How China Pulled So Far Ahead on Industrial Policy (nytimes).
Chinese exports threaten Europe even more than the US (politico).
Shut out of the US by tariffs and facing a backlash in Europe, Chinese carmakers could end up dominating many emerging markets (ft).
One after another, Latin American nations are following in the footsteps of the US and Europe by imposing prohibitive tariffs on Chinese imports. (bloomberg)
How China's EV makers aim to beat Tesla, legacy automakers in Europe (reuters)
China Has Gotten the Trade War It Deserves (theatlantic)
Why Is Xi Not Fixing China’s Economy? (foreignpolicy)
Increasing use of renewable energy in US yields $249bn of climate and health benefits (theguardian)
Odds & Ends
Your online influencer girlfriend is actually a rotating cast of low-wage workers (wired).
Meet AdVon, the AI-Powered Content Monster Infecting the Media Industry (futurism).
Authors of a landmark Alzheimer’s disease research paper published in Nature in 2006 have agreed to retract the study in response to allegations of image manipulation. (science)
How 3M Discovered, Then Concealed, the Dangers of Forever Chemicals (newyorker)
Don’t Believe the AI Hype (project-syndicate)