Market Risk : Cross Market Correlations Inform on the Scope & Timing of Market Risk Reversals
We assert that the historically unique pattern of correlation exhibited by the 21day correlation of daily returns between the S&P 500 (SPX) and the U.S. 10Yr Treasury (UST 10Y), the (RVSL) since 2007 both informs on a secular shift in liquid markets trading and can be enlisted as a key metric to gauge the timing and scope of periodic market shocks such as the May 2010, August 2011, October 2012, October 2014 and August 2015 *risk-off moves. *risk-off loosely defined as a sharp decline in Equities of 5% or more.Secular Shift: As the graph in our report illustrates, the vast majority (67%) of *outlier negative correlations since 1962 have been concentrated in just the past eight years. Anecdotal and empirical study suggests that several factors outlined in our Market Risk Management Framework piece have conspired to foster the instances of elevated correlations. A summary of these factors include increased banking and securities regulation, a decrease in the number of liquidity providers and the persistence of aggressive monetary policy globally by Central Banks.We note that our analysis of other risk and return measures (not shown here) including the VIX, credit spreads and stock dispersions, do not demonstrate the same level of persistent and outsized clustering
Year of publication: |
2016
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Authors: | Connors, Mark |
Other Persons: | Garg, Ishan (contributor) |
Publisher: |
[2016]: [S.l.] : SSRN |
Subject: | Risiko | Risk | Korrelation | Correlation | Marktrisiko | Market risk | Theorie | Theory | Volatilität | Volatility | Portfolio-Management | Portfolio selection |
Saved in:
freely available
Extent: | 1 Online-Ressource (5 p) |
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Type of publication: | Book / Working Paper |
Language: | English |
Notes: | Nach Informationen von SSRN wurde die ursprüngliche Fassung des Dokuments April 29, 2016 erstellt |
Other identifiers: | 10.2139/ssrn.2789875 [DOI] |
Source: | ECONIS - Online Catalogue of the ZBW |
Persistent link: https://www.econbiz.de/10012989860
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