We investigate the performance of non-linear return prediction models in the high complexity regime, i.e., when the number of model parameters exceeds the number of observations. We document a "virtue of complexity" in all asset classes that we study (US equities, international equities, bonds,...

Over the last decade foreign bond portfolio positions in US dollar assets have risen above the reciprocal US investor positions in foreign currencies. In periods of increased economic uncertainty, institutional investors hedge their international bond positions, which creates a net hedging...