The waiting is the hardest part
not doing anything is doing something
With Indian markets on the fritz, most strategies would’ve down scaled and gone into hibernation by now. This is the hardest part of the process where you have taken a drawdown but the recovery is far into the future. If the current situation puts you on the brink, then maybe you are too concentrated or too levered. Now is as good a time as any to think about things.
Can volume be a momentum predicter? An early 2000’s paper made the claim that stocks that traded with a higher than average volume went on to give higher returns. We did a quick backtest to see if anything can be made of it here: The High Volume Return Premium.
Markets this Week
More here: country ETFs, fixed income, currencies and commodities.
Links
Research
Education and Preferences for Desired Traits in Children (NBER)
There is a strong correlation between the preferences and beliefs of parents and their children. We demonstrate that women who acquired additional education are more likely to prioritize imagination, determination and perseverance, and a sense of responsibility as important traits to instill in children. Conversely, they are less inclined to regard religiosity, obedience, and unselfishness as essential attributes for children to learn at home. In addition, we find that education reduces women's religiosity.
Dynamic Factor Allocation Leveraging Regime-Switching Signals (SSRN)
This article explores dynamic factor allocation by analyzing the cyclical performance of factors through regime analysis.
Comparing Static versus Dynamic Asset Allocation (SSRN)
Asset allocation should depend on the expected return and the riskiness of the assets being invested in, and on the individual's degree of risk aversion. Expected returns and risk change over time, and therefore, so too should one's asset allocation.
The Hidden Costs of Networking and How it Affects Mutual Fund Managers (SSRN)
Using mutual fund managers’ connections, I find that well-connected managers within fund families exhibit poorer performance and add less value than worse-connected ones. Well-connected managers face less pressure to perform since their job security is less affected by poor performance, leading them to manage their funds less actively. Within-firm connectedness also hampers the efficient allocation of mutual fund assets to managers.
Economic Moats and Stock Performance: Is Warren Buffett wrong? (SSRN)
Firms with wide moats do not outperform the market. Firms with no moat underperform the market.
Investing
India
India's retail inflation surged to a 14-month high of 6.21% in October, driven by a jump in vegetable prices and dashing hopes of an interest rate cut by the central bank next month. (reuters)
Nestle, PepsiCo, Unilever among MNCs selling less healthy food products in India, low-income nations (livemint)
India shows all the signs of a failed middle-income country. For the past 15 years, incomes of ordinary Indians - those between the top 15% and 50% of the population - are stagnating. Over 120 mn people between 18 and 35 are neither in education nor looking for employment. The population 'employed' in agriculture is at its highest level, even as the share of manufacturing in GDP is at the lowest level in 30 years. (economictimes)
Top Indian companies registered their worst quarterly showing in more than four years for the July-September period, raising concerns that a lurking economic slowdown had begun to affect corporate earnings. (reuters)
Indian central government spending slowed during April-June due to the national elections, with total expenditure in six months through September at about 44% of the full-year target. Analysts say the weaker spending is one of the reasons for a recent slowdown in India's high frequency economic indicators. (reuters)
Indian urban consumption hit a two-year low this month, according to an index published by Citibank that captures indicators such as airline bookings, fuel sales and wages. (reuters)
Budgeted deficits for the current fiscal year for nearly all Indian states unveiling handouts were higher than five years ago, with many cutting capital expenditure to fund the populist measures (reuters). Also, a freebie race in Maharashtra election (firstpost)
row
One of China’s largest hedge funds advised some clients to pocket gains as Donald Trump’s return to the White House increases risks to the Asian nation’s economy and markets. (bloomberg)
China has built an economic system designed for the high-growth era — a system that suppresses consumer spending and encourages very high rates of investment. So what do you do if you have lots of capacity but your consumers can’t or won’t buy what you make? You try to export the problem. Hence the coming trade war. The rest of the world won’t passively accept Chinese surpluses on that scale. (nytimes)
Because the household sector as a whole is a net importer, and the tradable goods sector a net exporter, tariffs effectively represent a transfer from households to producers. As a result, the household share of GDP declines and, with it, the consumption share, while business profits usually rise. As a combined result, the savings share of GDP rises, not because household saving rises, of course, but because business profits rise. @michaelxpettis
Nearly one out of every three Brazilians lives below the poverty line. And poverty amplifies the desire to make an instantaneous fortune betting on the hometown soccer team or spinning the virtual roulette wheel. 20% of the money the government handed out for its flagship social program in August was spent at on-line gambling sites. (bloomberg)
Japan pledged more than $65 billion of fresh support for the nation’s semiconductor and artificial intelligence sector as Tokyo looks to keep up with a global spending spree on cutting-edge tech. (bloomberg)
Inside a Firewall Vendor's 5-Year War With the Chinese Hackers Hijacking Its Devices (wired)
Odds & Ends
By 2100, Britain along with 198 countries will have fertility rates below what is necessary to sustain population size over time (independent)
Like marriage, having a child was once seen as a cornerstone event, something young people did as they embarked on adult life. Now, it’s seen as a capstone event – what you do once other goals have been achieved. (bbc)
The drop in births in France accelerated last year to the fastest pace in half a century. The number of newborns fell by 6.6%, the biggest decline since the baby boom ended in the mid-1970s and the lowest level in any year since World War II. (bloomberg)
Russia bans 'child-free propaganda' to try to boost birth rate (reuters)
Meme of the Week
