| Popis: |
One important step of any active strategy – quantitative or not – is to understand how different types of environments can have an impact on the strategy’s profits and losses. Voluntarily dismissed the study of the nature of the strategy to consider strategy performance as a statistical object. Yet, if a strategy is statistically a performing one, what are its links towards the real economy? What is its sensitivity to economic conditions? One of the least explored topics in the academic research literature is the connection between financial assets’ cycles and macroeconomic ones. One of the main explanations for that is probably to be found in the disappointing empirical results obtained across various research articles, in spite of the very intuitive idea that both cycles should be connected. When only focusing on equities, the intuition is that, during periods of growth, earnings should be getting more and more positive, and equity prices should consequently trend upward. On the contrary, during periods of recession, the very same earnings should deteriorate, leading equity prices into a slump. What is more, depending on how deep the recession is, the scale of the impact of the economic downturn should be different. From this perspective, the 2001 versus 2008 US recession episodes reinforce the impression that economic and market cycles should be connected. |
