How does the supply of nominal government debt affect the macroeconomy? To answer this question, we propose a portfolio-balance model of the yield curve in which inflation is determined through an interest rate rule.
In the first installment of kicking the tires on alternatives to the standard 60/40 US stock/bond asset allocation, I reviewed three relatively tame possibilities. The results, based on adding various flavors of foreign equities and fixed income, were less than impressive, albeit in part because US markets have been on a tear in recent years. […]
Scenario analysis shows that the ability of pension funds to pay their pensions will be severely impacted by climate. But a discussion between asset owners at Sustainability in Practice revealed the challenges in the process.
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The TSX index rose by 9.5 percent in November 2020, adding large gains to an already sharp V-shaped recovery. The economic outlook improved at that time as well. We ask whether the stock market gains since last autumn are due to improving forecasts of firms’ earnings.
The expected risk premium for the Global Market (GMI) ticked up in August, reaching an annualized 6.1%, slightly above the previous month’s estimate. That’s a relatively elevated level compared with recent history. The forecast relates to the long-run outlook for GMI’s return over the “risk-free” rate, which is based on the yield for a 3-month […]
We investigate the economic forces behind the secular decline in bond yields. Before the anchoring of inflation in the mid-1990s, nominal shocks drove inflation, output and bond yields. Afterward, the impacts of nominal shocks were much less significant
Risk-adjusted performance continued to rise in August for the Global Market Index (GMI), an unmanaged, market-value-weighted portfolio that holds all the major asset classes (except cash). GMI’s Sharpe ratio increased for a sixth straight month, reaching 0.93 – the highest in over two years. GMI’s current Sharpe ratio is at the 98th percentile for the […]