• PBOC Monthly: Liquidity - Once more, with gusto

    Source: Jason Tan, Cindy Liu, Ismael Pili, David Marshall
    Date Submitted: 06 Mar 2019
    Views: 161
    Downloads: 0
    An update on China's financing and lending landscape. (Subscription required.)
  • Uzbekistan: The som has been stable so far but how long can it last?

    Source: Firdavs Olimov, CFA, Kenneth Lai Kar Mun, CFA, Shawn Abdurakhimov , Hasan Khudoyorov
    Date Submitted: 18 Oct 2018
    Views: 227
    Downloads: 2
    Since one-off devaluation of the Uzbekistani som to 8,100 UZS/USD from 4,210 on 5 September 2017, the currency has been quite stable thanks to growing exports, increasing foreign investments, loans from international financial institutions (EBRD, ADB, etc.), decreasing use of US dollar within Uzbekistan, and a small intervention from Central Bank of Uzbekistan (CBU).
  • CFAM-FDU - Initial coin offerings and platform building

    Source: Jiasun Li, William Mann
    Date Submitted: 07 Oct 2018
    Views: 1256
    Downloads: 52
    As initial coin offerings (ICOs) explode in popularity in the startup world, they are surrounded by controversy. The response of market practitioners and regulators has varied, from enthusiasm to outright bans. Li and Mann offer an economic analysis of the role of ICOs in development of platforms. They analyze economic efficiency to pinpoint when token sales create value. Their findings have implications for regulators and practitioners in the booming ICO market.
  • Predictability, innovation, and competition in Bitcoin's mining market

    Source: Robert Parham, Einar Kjenstad
    Date Submitted: 05 Oct 2018
    Views: 152
    Downloads: 6
    Bitcoin mining has developed into an industry in its own right. But specialized equipment manufacturers (ASICs) now control the market, deriving most of the profits from it. Parham and Kjenstad analyse the economics of the Bitcoin mining market, showing that their model is able to predict energy consumption by miners and R&D expenditure by manufacturers. They then use the economics of this market to test whether more competitive industries invest more in R&D.
  • Tokenomics: Dynamic Adoption and Valuation

    Source: Lin William Cong, Ye Li, Neng Wang
    Date Submitted: 07 Nov 2018
    Views: 3574
    Downloads: 122
    We provide a dynamic asset-pricing model of cryptocurrencies/tokens on platforms and highlight their roles on endogenous user adoption. Tokens facilitate transactions among decentralized users and allows them to capitalize future growth of promising platforms. Tokens thus can accelerate adoption, reduce user-base volatility, and improve welfare. Token price increases non-linearly in platform productivity, users’ heterogeneous transaction needs, and endogenous network size. The growth of user base starts slow, becomes explosive and volatile, and eventually tapers off. Our model can be extended to discuss platform token supply, cryptocurrency competition, and pricing assets under network externality.
  • Bangladesh Strategy 2018 - A challenging year for equities

    Source: Asif Khan, CFA, Nasrin Akter Proma, Mustavi Zaman Khan
    Date Submitted: 06 Aug 2018
    Views: 3238
    Downloads: 201
    Bangladesh Strategy 2018 - A challenging year for equities
  • Distributed ledgers and ICOs 

    Source: Maggie McGhee, Director, Professional Insights, ACCA
    Date Submitted: 10 May 2018
    Views: 3761
    Downloads: 59
    Distributed ledgers and ICOs - presentation deck for ACCA - CFA Institute VIP Luncheon on 14 May 2018 which covers:

    - Using Distributed ledgers for the right reasons
    - Introduction of crytocurrencies and ICO activities over the past years
    - Risks for investors, regulators and the economies
    - Key considerations for the future

  • Cryptocurrency and Blockchain Technology - The Road Ahead

    Source: Chan Fook Leong, CFA, Darren Chua, CFA
    Date Submitted: 17 Apr 2018
    Views: 6189
    Downloads: 267
    Responding to the potential of blockchain technology and growing interest in cryptocurrencies, CFA
    Singapore organised a talk on 12 March 2018 at Capital Tower.

    Source: Rich Blake, Brindha Gunasingham, PhD, CFA
    Date Submitted: 30 Jul 2018
    Views: 21288
    Downloads: 0
    Based on the paper “Business Cycles and the Cross-Section of Currency Returns” by Steven J. Riddiough and Lucio Sarno, available at

    This paper was recently recognized as the CFA Institute Asia-Pacific Research Exchange Best Paper at the 7th Annual Financial Research Network (FIRN) Conference. FIRN is a network of finance researchers and PhD students across Australia and New Zealand.

    Originally published in the spring of 2017 and recently updated, “Business Cycles and the Cross-Section of Currency Returns,” by co-authors Steven J. Riddiough (University of Melbourne) and Lucio Sarno (Cass Business School and CEPR), makes a case for a genuine connection between currency returns and the waxing and waning of countries’ business cycles worldwide. According to Riddiough and Sarno, excess returns can be gleaned—and quantified in a risk-compensation context—by buying and selling a crosssection of currencies relative to the strengths or weaknesses of their country’s economic cycles, a finding that flouts decades of research suggesting the absence of a link between
    macroeconomic variables and currency fluctuations.

    Among the drivers of such a strategy is the use of the spot exchange rate, demonstrably more 
    predictable than interest rate moves. Also crucial to understanding the source of returns is the observation that the most robust currency appreciations occur when cross-border business cycles are diverging. Although buying the currencies of strong economies and selling the currencies of weaker ones might seem intuitive, there is no shortage of real or theoretical headwinds facing anyone who might attempt it. The spot market is notoriously and exceptionally volatile, and the nature of forecasting business cycles represents its own deeply explored yet only partially understood pursuit. Empirically, Riddiough and Sarno have tilled new ground.

    In their paper, Riddiough and Sarno refer to academic research that supports the notion of a strange disconnect between macro fundamentals and currency exchange rate moves, particularly in short (one month) and intermediate (one year) time horizons. Why wouldn’t a country’s economic growth rate underpin—or indeed, help predict—the fluctuation of its currency, just as a company’s fundamentals would have an influence on share price? With this counterintuitive reasoning as a talisman, Riddiough and Sarno embark on a journey to resolve what others before them have found so puzzling. Employing that broadest measure of macro conditions—the business cycle—they examine how this basic concept gets measured in the first place, whether it even can be measured, and, if so, whether there is some way to harness it for alpha production.

    Step one for Riddiough and Sarno was to determine how best to take the extensive data from a cross-section of 27 countries over three decades and come up with a measure of when each country’s business cycles started, when they halted, and how long they lasted. Even arriving at a commonly accepted measure for business cycles—the so-called “output gap,” which is a country’s percentage deviation from its long-term trend—proved challenging. Leaving aside the not-uncommon idea that cycles are too mercurial to pin down, there was the vexing conundrum of sifting through and amalgamating various output-gap measurement techniques (quadratic data-spanning filters versus linear counterparts). The authors needed to produce a drop cloth of macroeconomic conditions
    upon which to portray a currency trading strategy conducted in a long-term portfolio setting. By running numbers through the prism of a series of five simulated portfolios (set up in contrast, with degrees of weak and strong currencies), the authors were able to take into consideration such concepts as relative performance, risk compensation, and diversification benefits that could be associated with currency returns. In other words, this was no carry trade. The question then became, “If business cycles could predict currency returns in a portfolio setting, could an investor capitalize?”

    Spot exchange rate predictability was evident in both a cross-section and a time series analysis of the countries’ business cycles. In summary, buying and selling based on business cycles not only generated high returns but the outperformance was not correlated with the most common currency strategies, such as long Australian dollar/short Japanese yen. According to the authors, “Currencies issued by strong economies (high output gaps) command higher expected returns, which compensates more risk-averse investors in weak economies.” The authors go on to say, “Our research suggests a strong predictive link from business cycles to currency returns, and raises questions as to why our results differ from those in the long-standing international macroeconomics literature.”

    One reason may lie in the use of spot rate moves to extract excess return, and not via commonly used derivatives. In the aforementioned carry example, the trade would remain static; those long and short positions wouldn’t change over time even though business cycles or output gap differentials would.

    “An output-gap investor would have taken long and short positions in both the Australian dollar and Japanese yen as their relative business cycles fluctuated,” the authors claim. Returns, they emphasize, mainly come from the divergence in business cycles. Using data and a rigorous process, investors can define cycles and exploit their turns.

    Where once investors had only a few “risk factors” to choose from—growth, momentum, size, and value—now they have dozens and must add business cycles to the growing list. Because an output-gap strategy has such low correlation with other currency strategies, investors who once only considered currency exposure as something to be hedged might be open to using it as a source of alpha generation, particularly at a time when large segments of the stock and bond markets are reaching boiling points and perhaps pointing toward the start of a new set of intraglobal cycles to come.

    “At the heart of almost any model of currency returns is a tight link between the macroeconomy and exchange rate returns,” Riddiough explained recently in an email. “But it’s taken a long time to pin down this relationship empirically. In this paper, we’ve demonstrated that the link is real, spot returns are predictable, and the resulting investment strategy is unlike any we commonly employ in currency markets.”

    Riddiough and Sarno have found a relationship between macro fundamentals and exchange rates—a unique, underexploited source of returns. The analysis has been completed using data from markets around the world, including Australia, Japan, and New Zealand, demonstrating that this is not a phenomenon confined to the United States or even the Eurozone. Global and Asia Pacific investors, hungry for diversification, should take note.


    Summarized by Rich Blake. Rich is a veteran financial journalist who has written for numerous media outlets, including Reuters, ABC News and Institutional Investor. The views expressed herein reflect those of the authors and do not represent the official views of CFA Institute or the authors’ employers.

    This article qualifies for 1 CE under the guidelines of the CFA Institute Continuing Education Program. 
    We encourage CFA Institute members to login to the CE tracking tool to self-document these credits.

  • Commodities Are Like a Box of Chocolates, if You Only Factor in Interest Rates and the U.S. Dollar

    Source: Marya Alsati
    Date Submitted: 16 Mar 2018
    Views: 1215
    Downloads: 0
    The Dow Jones Commodity Index (DJCI) was down 1.9% for the month and up 0.7% YTD, and the S&P GSCI was down 3.3% and flat YTD.
  • NZFC - Monetary policy and risk in the open economy

    Source: Anella Munro
    Date Submitted: 13 Mar 2018
    Views: 252
    Downloads: 14
    Under modest assumptions, variations in asset prices and returns mainly reflect variations in risk. I propose a general equilibrium, two-country model that incorporates risk premia (eg. sovereign, inflation, liquidity risk) in asset prices and returns. In the model with risk, monetary policy (i) determines the short-term nominal interest rate, but no longer directly drives the marginal rate of inter-temporal substitution (IMRS); (ii) delivers a Dornbusch 1976- type exchange rate response, but the mechanism works mainly through risk premia; (iii) shifts the expression of bond risk from the bond market to the foreign exchange market; and (iv) isolates the exchange rate from variation in the IMRS.
  • NZFC - Political Risk, Exchange Rate Return and Volatility

    Source: Tahir Suleman, Martin Berka
    Date Submitted: 13 Mar 2018
    Views: 247
    Downloads: 2
    We examine the impact of political risk variables on the nominal exchange rate return and its volatility. We used the political risk spread between the country of interest and the USA. Overall results reveal that emerging markets are more exposed to political risk compared to developed. Further, the impact of political risk variables is more on the floating exchange rate compared to managed floating and fixed exchange rate as might be expected, since intervention in the market will generally reduce to eliminate the influence of alternative factors. We also find strong evidence that volatility increases more during a period of high political risk and poor economic conditions for only emerging markets. Keywords: Political risk, exchange rate regime, exchange rate return and volatility.
  • NZFC - Efficiency of New Zealand’s Spot FOREX Market after Twenty Four Years of Float

    Source: Sazali Abidin, Azilawati Banchit
    Date Submitted: 13 Mar 2018
    Views: 257
    Downloads: 3
    Government growth policies in the Asia-Pacific region throughout the 1980s involved a considerable amount of financial market liberalisation, which was intended to increase the efficiency of financial markets. The rationale for a freely floating currency rests heavily on the idea that an unregulated market will on average produce more appropriate (in an economic sense) exchange rates than a market managed by government officials. With this in mind, the New Zealand Government floated the New Zealand dollar in March of 1985. The purpose of this paper is to investigate the efficiency of the New Zealand spot FOREX market after the float, using both univariate and multivariate testing procedures. The data employed to obtain these results has a 14 year delay between the floating of the New Zealand dollar and the start of the sample allowing market participants to become more experienced and sophisticated in their dealings with the floated currency. This has allowed for the production of results that truly reflect the influence of the float on the efficiency of New Zealand’s spot FOREX market. The results of these tests confirm the notion of informational market efficiency within New Zealand’s spot FOREX market. These robust results provide strong support for market liberalisation in New Zealand, as efficiency has been achieved.
  • Sex, drugs, and bitcoin: How much illegal activity is financed through cryptocurrencies?  

    Source: Sean Foley, Jonathan R. Karlsen, Talis J. Putnins
    Date Submitted: 02 Feb 2018
    Views: 604
    Downloads: 0
    Cryptocurrencies have grown rapidly in price, popularity, and mainstream adoption. The total market capitalization of bitcoin alone exceeds $250 billion as at January 2018, with a further $400 billion in over 1,000 other cryptocurrencies. Over 170 “cryptofunds” have emerged, attracting around $2.3 billion in assets under management. What was once a fringe asset is quickly maturing.
    The rapid growth in cryptocurrencies and the anonymity that they provide users has created considerable regulatory challenges, including the use of cryptocurrencies in illegal trade (drugs, hacks and thefts, illegal pornography, even murder-for-hire), potential to fund terrorism, launder money, and avoid capital controls. There is little doubt that by providing a digital and anonymous payment mechanism, cryptocurrencies have facilitated the growth of “darknet” marketplaces that trade illegal goods and services.
    In a recent research paper, we quantify the amount of illegal activity that involves the largest cryptocurrency, bitcoin. As a starting point, we exploit several recent seizures of bitcoin by law enforcement agencies to construct a sample of known illegal activity. We also identify the bitcoin addresses of major illegal darknet marketplaces. The public nature of the blockchain allows us to work backwards from the law enforcement agency bitcoin seizures and the darknet marketplaces through the network of transactions to identify those bitcoin users that were involved in buying and selling illegal goods and services online. We then apply two econometric methods to the sample of known illegal activity to estimate the full scale of illegal activity.
    We find that illegal activity accounts for a substantial proportion of the users and trading activity in bitcoin. For example, approximately one-quarter of all users (25%) and close to one-half of bitcoin transactions (44%) are associated with illegal activity. The estimated 24 million bitcoin market participants that use bitcoin primarily for illegal purposes (as at April 2017) annually conduct around 36 million transactions, with a value of around $72 billion, and collectively hold around $8 billion worth of bitcoin.
    To give these numbers some context, the total market for illegal drugs in the US and Europe is estimated to be around $100 billion and €24 billion annually. Such comparisons provide a sense that the scale of the illegal activity involving bitcoin is not only meaningful as a proportion of bitcoin activity, but also in absolute dollar terms. The scale of illegal activity suggests that cryptocurrencies are transforming the way black markets operate by enabling “black market e-commerce”. In effect, cryptocurrencies are transforming the black market much like PayPal and other online payment mechanisms revolutionized the retail industry through online shopping.
    In recent years (since 2015), the proportion of bitcoin activity associated with illegal trade has declined. There are two reasons for this trend. The first is an increase in mainstream and speculative interest in bitcoin (growth in the number of legal users), causing the proportion of illegal bitcoin activity to decline, despite the fact that the absolute amount of such activity has continued to increase. The second factor is the emergence of alternative cryptocurrencies that are better at concealing a user’s activity (e.g., Dash, Monero, and ZCash). Despite these factors and numerous darknet marketplace seizures by law enforcement agencies, the amount of illegal activity involving bitcoin remains close to its all-time high.
    In shedding light on the dark side of cryptocurrencies, we hope this research will reduce some of the regulatory uncertainty about the negative consequences of cryptocurrencies. Hopefully, more informed policy decisions that assess the costs and benefits will contribute to these technologies reaching their potential. Our paper also helps understand the intrinsic value of bitcoin, highlighting that a significant component of its value as a payment system comes from its use in illegal trade. This has ethical implications for bitcoin as an investment. Third, the techniques developed in this paper can be used in cryptocurrency surveillance in a number of ways, including monitoring trends in illegal activity, its response to regulatory interventions, how its characteristics change through time, and identifying key bitcoin users, such as “hubs” in the illegal trade network.
    For more information, download the paper at
  • Central Bank Balance Sheet Policies and Spillovers to Emerging Markets 

    Date Submitted: 29 Sep 2017
    Views: 1048
    Downloads: 21

    We develop a theoretical model that shows that in the near future, the monetary policies of some key central banks in advanced economies (AEs) will have two dimensionschanges in short-term policy rates and balance sheet adjustments. This will affect emerging market economies (EMs), especially those with a pegged exchange rate, as these EMs primarily use a single monetary policy tool, i.e., the short-term policy rate. We show that changes in policy rates and balance sheet adjustments in AEs may differ in their respective financial spillovers to pegged EMs. Thus, it will be difficult for EMs to mitigate different types of spillovers with a single monetary policy tool. In that context, we use the model to show how EMs might use additional toolscapital controls and/or macro-prudential policyto complement their monetary policy and financial stability toolkit. We also discuss how balance sheet adjustments that affect long-term interest rates may percolate to influence short-term interest rates via financial plumbing. 

  • The Anatomy of the Gold Crash of April 12-15, 2013 from a Liquidity Perspective – An Application of Donier and Bouchaud’s Measure of Illiquidity

    Source: Daniel Ceferino D. Camagay
    Date Submitted: 26 Sep 2017
    Views: 1352
    Downloads: 15
    Gold crash of April 12-15, 2013 as seen from a liquidity perspective using Donier and Bouchard's measure of illiquidity
  • EM Weekly: Beta Sell-Off, Asia Least Hard Hit

    Source: Richard Briggs
    Date Submitted: 13 Aug 2017
    Views: 701
    Downloads: 6
    • Risk assets took a bump last week largely due to global, rather than EM, factors. DM underperformed EM in excess return terms. In IG, EM corporates generated excess returns of minus 0.38% versus minus 0.54% on DM. In HY corporates a similar story was true with excess returns of minus 0.44% versus minus 1.12% on DM.  
    • One of the drivers of the risk off tone last week was the war of words between US President Donald Trump and North Korea's leader Kim Jong-un. That hit the Korean won hardest, it fell 1.64% versus the dollar over the week. Asian currencies were generally weaker last week, with the exception of the Chinese renminbi which strengthened by 0.98%. But in hard currency, the opposite was true with Korean names and sovereign debt generally outperforming IG counterparts.  
    • In fact the hardest hit last week in the hard currency corporate and sovereign indices were the LatAm and sub-Saharan African credits which are usually caught up in any beta sell off regardless of the driver. Asian names, which tend to be tighter, higher rated and more defensive were the strongest performing last week in that risk-off environment, including Korea.
    • Notable outliers to those broad moves last week included Teva which continued to sell off for a second week with very high trade volumes persisting after weaker 2Q17 results in the week before last. Teva was down by 1.62% in excess return terms. Venezuela and PDVSA were also among the bottom of the high yield indices' constituents for performance last week and continued to be very volatile, falling on average by 3.32% and 3.69% respectively in price terms last week. Kenya was at the stronger end of the sovereign index last week with excess returns of 0.71%, after relief that last week's elections didn't turn to violence, albeit with the result still being disputed and strikes planned on Monday.
    • Issuance slowed to a trickle last week with $2.5 bn priced, of which $1.7 bn was rated high yield. The only sovereign new issue was Gabon (B3/B+) which priced a $200 mn tap of its 6.95% 2025 notes. There are several other sovereign new issues being rumoured as coming in the second half of August or early Autumn including Bahrain (euros), $2 bn from Oman and $3 bn from Nigeria.
  • Business Cycles and the Cross-Section of Currency Returns

    Source: Steven J. Riddiough, Lucio Sarno
    Date Submitted: 09 Jul 2017
    Views: 915
    Downloads: 94
    In recent years, traditional foreign exchange market strategies, including carry, value and momentum have all underperformed markedly, raising major concerns about how investment managers should form currency portfolios. In this paper, we identify an alternative and theoretically motivated source of currency returns that is uncorrelated with existing strategies but generates substantial risk-adjusted returns. The strategy exploits cross-sectional variation in countries' business cycles by taking long positions in strong (overheating) economies and short positions in weak (below trend) economies. We find the strategy performs strongly both in- and out-of-sample and when using alternative techniques for measuring business cycles. Moreover, we provide evidence that a business cycle risk factor adds substantial pricing power to existing risk-based models when explaining the cross-sections of currency market returns, and thus we provide a rare link between macro-fundamentals and currency market returns.
  • China MSCI EM inclusion can be CNY & CNH positive

    Source: CIBC (Patrick Bennett)
    Date Submitted: 19 Jun 2017
    Views: 497
    Downloads: 18
    After some years of false starts, Chinese A-shares are expected to be included in the MSCI Emerging Market Index
  • Bangladesh National Budget Review FY'18

    Source: EBLSL Research Team
    Date Submitted: 04 Jun 2017
    Views: 1435
    Downloads: 138
    The 46th National Budget of Bangladesh and 11th by Finance Minister AMA Muhith has been proposed on 1st June, 2017. Proposed budget size for FY ’18 is BDT 4002.66 bn which is 18.0% of GDP. This is the largest budget in the history of Bangladesh. Target Revenue is BDT 2879.91 bn caused a deficit amounting to BDT 1122.75 bn which will be financed through domestic sources (BDT 603.52 bn) and External Borrowings (BDT 519.24 bn).
  • Indicators DZ and RDZ: Essence, Methods of Calculation, Signals and Rules of Trading

    Source: Serhiy Kozmenko,
    Date Submitted: 07 Apr 2017
    Views: 429
    Downloads: 6
    Speculators exert more and more influence on prices on world exchange markets. Often the result of this is a formation of so-called “bubbles” with subsequent shocks to national and global economy. The purpose of speculators is earnings in a relatively short period of time using the differences in prices for exchange assets. Most of the speculators as a reference point for decision-making use technical analysis methods (prediction of future prices based on previous prices). Using more sophisticated methods gives advantage and opportunity to earn on a relatively short-term fluctuations in the exchange markets. General rules of technical analysis applied to all types of exchange markets – foreign exchange and stock markets, commodity markets and markets for derivative financial instruments. Thus, developing of a new technical indicator or trading strategy for FOREX (foreign exchange market) can be applied to analyze prices of gold or oil, stock indices and stock prices.
  • Detecting 'Fake' Price Movements: A Convergence/Divergence Indicator

    Source: Guglielmo Maria Caporale, Luis A. Gil-Alana
    Date Submitted: 07 Apr 2017
    Views: 2787
    Downloads: 28
    This paper develops a new pair trading method to detect “fake” price movements and arbitrage opportunities that is based on a convergence/divergence indicator (CDI) belonging to the oscillatory class. The proposed technique is applied to a cross-currency pair (EURAUD, 2010-2015), and trading rules based on CDI signals are obtained. The CDI indicator is shown to outperform others of the oscillatory class and to generate profits (in the case of EURAUD) without the need for incorporating additional algorithms in the trading strategy. The suggested approach is of general interest and can be applied to different financial markets and assets.
  • Is There a Friday Effect in Financial Markets?

    Source: Guglielmo Maria Caporale,
    Date Submitted: 07 Apr 2017
    Views: 2295
    Downloads: 23
    This paper tests for the presence of the Friday effect in various financial markets (stock markets, FOREX, and commodity markets) by using a number of statistical techniques (average analysis, parametric tests such as Student's t-test and ANOVA analysis, non-parametric ones such as the Kruskal-Wallis test, regression analysis with dummy variables). The evidence suggests that stock markets are immune to Friday effects, whilst in the FOREX Fridays exhibit higher volatility, and in the Gold market returns are higher on this day of the week. Using a trading robot approach we show that the latter anomaly can be exploited to make abnormal profits.
  • Is There Really a Renminbi Bloc in Asia?

    Source: ; Pontines, Victor | February 2014, Pontines, Victor
    Date Submitted: 27 Feb 2017
    Views: 618
    Downloads: 5
    Kawai, Masahiro; Pontines, Victor | February 2014
  • Currency market in Azerbaijan: Why the national currency is losing its value?

    Source: Development, Center for Economic and Social
    Date Submitted: 01 Feb 2017
    Views: 822
    Downloads: 1
    Development, Center for Economic and Social | December 2016
  • NZFC-To Carry, Or Not To Carry, That Is The Question

    Source: Jedrzej Bialkowski, Glenn Boyle, Mark Carrodus
    Date Submitted: 11 Jan 2017
    Views: 657
    Downloads: 9
    In the paper, we use unique and proprietary information on industry stop-loss rules to evaluate the feasibility of currency carry trades considered by academic researchers. We find that these rules cause reported carry trade profitability to largely disappear, with most trades having to be closed out early. The much-vaunted profitability of the carry trade appears to depend on staying the course, contrary to standard risk management policies. This calls into question much of the literature that seeks to explain reported carry trade returns.
  • Transparency in FX Trades is Vital

    Source: QIC
    Date Submitted: 28 Dec 2016
    Views: 1181
    Downloads: 0
    The foreign exchange (FX/forex) market is a colossus dwarfing the world’s equity and bond markets. Yet it remains remarkably opaque requiring intensive attention to detail, process discipline and client-first values to ensure that institutional investors’ FX exposures are properly managed. Even small cost slippages can be detrimental when large sums are at stake.
  • Active Currency: A Vital Diversifier in a Low Yield World Part 1

    Source: QIC
    Date Submitted: 27 Dec 2016
    Views: 1282
    Downloads: 0
    There weren’t many winners from the washout of the 2008 financial crisis, but as the efficient market theory floundered, Keynesian economic policy re-emerged to steady the ship. Easy money sloshed through the US economy and before long other countries were following suit.
  • Active Currency: A Vital Diversifier in a Low Yield World Part 2

    Source: QIC
    Date Submitted: 27 Dec 2016
    Views: 1294
    Downloads: 0
    In Part 1 we explored the benefits of utilising active currency to counter the low bond yields currently plaguing fixed income portfolios. Part 2 digs deeper and looks at three factors which are making it harder for bonds to play their traditional role as the ballast within portfolios. But there is an upside: active currency is becoming a vital return source in the fixed income manager’s toolkit. It’s rare for the vagaries of fixed income markets to make the leap into the mainstream finance media, but at times last year it was near impossible to go a week without stumbling across another article decrying diminished bond market liquidity.
  • The Right Time for Dynamic Currency Hedging

    Source: QIC
    Date Submitted: 27 Dec 2016
    Views: 1274
    Downloads: 0
    Amid an environment where asset return expectations are in the low single digits, it’s more important than ever to seek out an edge, either in the form of boosting returns, or providing downside protection.
  • Currency Decision Could Make All the Difference in a Low Yield World

    Source: QIC
    Date Submitted: 27 Dec 2016
    Views: 1271
    Downloads: 0
    This third instalment in our currency management series builds on ideas we shared in the first and second parts of the compendium, Transparency in FX Trades and Dynamic Currency Hedging, respectively. The motivation for our latest thoughts is a conviction that currency hedging decisions can be a source of extra return, without undue risk, in a world of historically low yields.
  • 【China Market Strategy】Outlook 2017: High-Wire Act

    Source: Hao Hong, CFA
    Date Submitted: 07 Dec 2016
    Views: 2816
    Downloads: 12
    This research appears on WenXin's blog "Hong Hao China Strategy" on 4 December 2016.
  • 【中国市场策略】2017年展望:微妙的平衡

    Source: Hao Hong, CFA
    Date Submitted: 07 Dec 2016
    Views: 867
    Downloads: 12
    This research appears on WenXin's blog "洪灝的中国市场策略" on 4 December 2016.
  • AFM – Global price discovery in the Australian dollar market and its determinants

    Source: Fei Su
    Date Submitted: 23 Nov 2016
    Views: 661
    Downloads: 2
    Using intraday trading data over the period of January 1999 to December 2013, we examine the price discovery in the Australian dollar (AUD) market as well as its determinants. We employ a non-parametric Two-scale Realized Variance (TSRV) estimator to measure the global information distribution in trading of AUD. We find that the European market and U.S. market, particularly the overlapping trading session of London and New York, are the most important markets for price discovery in AUD market. The empirical results also confirm that more favorable market states and more unexpected order flows on macroeconomic announcement days make a significant contribution to the price discovery in AUD market. Furthermore, we document that a higher level of market integration and international consolidation contributes to the price discovery process in the long-run.
  • Emerging market equities: an Australian perspective

    Source: Daniel Radcliffe, Geoff Warren
    Date Submitted: 07 Nov 2016
    Views: 805
    Downloads: 7
    Examines investing in emerging markets from an Australian perspective; noting how currency relationships reduce risk for Australian investors.
  • Equity home bias in Australian superannuation funds

    Source: Geoff Warren
    Date Submitted: 07 Nov 2016
    Views: 775
    Downloads: 6
    Equity home bias for Australian super funds is modelled as a 2-asset choice under the influence of legacy, a trade-off between expected returns against portfolio risk and peer risk, and adaptive expectations, and taxation differences.
  • Crises and Central Banks

    Source: Ishwar Chidambaram
    Date Submitted: 02 Nov 2016
    Views: 3874
    Downloads: 288
    A post-crisis look at the increasingly fragmented monetary policies of global Central Banks and the implications for Main Street
  • This is a test article

    Source: Joe Bloggs, Jane Doe
    Date Submitted: 18 Oct 2016
    Views: 638
    Downloads: 0
    Lorem ipsum dolor sit amet, consectetur adipiscing elit. Sed a nulla vitae purus rutrum aliquet. Donec eu vestibulum leo, non accumsan mi. Ut risus lacus, pellentesque id feugiat eget, mollis eget lorem. Aliquam commodo blandit est eget facilisis. Etiam erat est, bibendum at ipsum id, ornare dictum ipsum. Nam non nisi eget justo iaculis vulputate. Cras nec maximus risus. Nullam fermentum lacus at diam ultricies, a congue velit condimentum. Curabitur pellentesque turpis vulputate nunc porttitor, sed dictum enim hendrerit. Sed dignissim sapien eget mi viverra, placerat vestibulum risus pulvinar. Cum sociis natoque penatibus et magnis dis parturient montes, nascetur ridiculus mus. Morbi sit amet diam eget mauris aliquet scelerisque. In consectetur quis ipsum id condimentum. In fermentum orci vel odio ultricies, a maximus velit pharetra. Nullam consequat ante ipsum. Vivamus vestibulum turpis dignissim, sollicitudin tortor eget, fermentum sem. Donec malesuada nibh nec libero sollicitudin vestibulum. Etiam vitae faucibus lectus, sed mattis dui. Donec ac felis commodo, fringilla nisi sit amet, tincidunt justo. Curabitur eu leo nec mi tristique maximus.
  • Interview: Yuan Devaluation Likely

    Source: Richard Duncan
    Date Submitted: 14 Oct 2016
    Views: 1387
    Downloads: 0
    An Interview published in Hankook Ilbo I have just returned from speaking at The Third China Forum in Seoul, an event hosted by the Korean conglomerate Hankook Ilbo. The theme of the conference was “The Shift In China’s Paradigm”. Much of the discussion focused on the outlook for the Yuan. I came away with the impression that a further devaluation of the Yuan is increasingly likely. As part of this event, the Hankook Ilbo newspaper interviewed me. The interview was published in Korean on November 3rd. Please find the interview below:
  • Weekend Reads from China: The RMB in the SDR — What It Means for China

    Source: Janet Zhang
    Date Submitted: 27 Jun 2016
    Views: 1253
    Downloads: 0
    This blog appeared on CFA Institute's website on 3 December 2015.
  • RMB joins the elite club

    Source: Larry Cao, CFA
    Date Submitted: 27 Jun 2016
    Views: 1326
    Downloads: 0
    This article appeared on Asia Asset Management on 3 December 2015.
  • 我们面对的是一场货币战争

    Source: 梁慧芝, CFA
    Date Submitted: 15 Jun 2016
    Views: 585
    Downloads: 5
    This article appears on CFA Institute hedge fund journal 2013 issue, season 2. The original article appears on Investment Risk and Performance Feature Articles.
  • 货币增益:外汇市场是不是机构投资者追逐ALPHA的处女地?

    Source: Nathan Jaye, CFA
    Date Submitted: 07 Jun 2016
    Views: 979
    Downloads: 6
    This article appears on CFA Institute hedge fund journal 2014 issue, season 1. The original article appears on CFA Institute Magazine, November/December 2013, Vol. 24, No. 6: 20–23
  • “Dim Sum” on the Financial Menu

    Source: Bob Dannhauser
    Date Submitted: 06 Jun 2016
    Views: 963
    Downloads: 2
    This is a blog posted on CFA Institute's website on 23 September 2011
  • Board of Director Effectiveness and Earnings Conservatism: Preliminary Australian Analysis

    Source: Nigar Sultana, J-L-W. Mitchell Van der Zahn, Inderpal Singh
    Date Submitted: 24 Feb 2016
    Views: 708
    Downloads: 11
    Overarching objective is to examine influence of board of director effectiveness on the extent of earnings conservatism among Australian listed firms.