Alternative data

Oh My! I Bought A Wrong Stock! – Investigation of Lead-Lag Effect in Easily-Mistyped Tickers

20.June 2024

Our new study aims to investigate the lead-lag effect between prominent, widely recognized stocks and smaller, less-known stocks with similar ticker symbols (for example, TSLA / TLSA), a phenomenon that has received limited attention in financial literature. The motivation behind this exploration stems from the hypothesis that investors, especially retail investors, may inadvertently trade on less-known stocks due to ticker symbol confusion, thereby impacting their price movements in a manner that correlates with the leading stocks. By examining this potential misidentification effect, our research seeks to shed some light on this interesting factor.

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Portfolio Diversification Including Art as an Alternative Asset

15.March 2024

Alternative investment assets (also such as rare vintage and collectible items, expensive old high-quality alcohol, discontinued fashion, etc.) are a hit among wealthy investors, even though it is not easy to obtain direct or indirect exposure to diversified art investment(s) in a traditional finance kind of way. However, alternative assets are helpful in portfolio diversification as they last (if stored properly), usually appreciate in value (but sometimes not very predictably), and have a low correlation to traditional assets like stocks, real estate, gold, or fixed-income securities. Although alternative assets are highly illiquid and sometimes very challenging to value correctly, researchers are interested in them. We will closely look at one of the research papers that investigates the role of art in the portfolio, utilizing mean-variance optimization and less-used STL decomposition.

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Cyber Risk and the Cross-Section of Stock Returns

12.December 2023

In today’s fast world, where information flows freely and transactions happen at the speed of light, the significance of cybersecurity cannot be overstated. But it’s no longer just a concern for IT professionals or tech enthusiasts. The specter of well-documented hacks and phishing incidents casts a long shadow over investors, acting as powerful illustrations of how security breaches, vulnerabilities, and cyber threats can reverberate through financial markets. In this blog post, we’ll delve into the intricate relationship between cybersecurity risk and stock performance, uncovering how these digital hazards can influence financial markets.

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Are Alternative Social Data Predictors Useful for Effective Allocation to Country ETFs?

29.November 2023

The part of the attention of our own research from the last few months was a little skewed on the side of countries’ indices and their corresponding ETFs representing them, and we finally conclude our “trilogy” of investigation on the efficiency of these markets. Firstly, we analyzed price-based valuation measures, and then, in November, we investigated the impact of military expenditures on the performance of international stock markets. We will wrap up this mini-series by analyzing a few additional alternative datasets containing variables we thought might be of interest in meaningfully describing each country’s societal standing – the climate change awareness index, the happiness score, the corruption perception index, and the income inequality score.

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Military Expenditures and Performance of the Stock Markets

15.November 2023

“Si vis pacem, para bellum”, is an old Roman proverb translated to English as “If you want peace, prepare for war”, and it is the main idea behind the military policy of a lot of modern national states. In the current globally interconnected world, waging a real “hot war” has very often really negative trade and business repercussions (as the Russian Federation realized in 2022). Still, even though wars among developed nations are luckily not as popular as they used to be, modern states heavily invest in their own defense. Nobody wants to be caught military unprepared in case of a local or global geopolitical crisis. A strong military should bring a safe environment to do business, and trade should flourish uninterrupted. But are all those national military expenditures financially rewarded? Do stock markets of countries with a strong military outperform their peers? That’s the question we have decided to answer in the following analysis.

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Exploration of the Arbitrage Co-movement Effect in ETFs

23.May 2023

We continue our short series of articles dedicated to the exploration of trading strategies that derive their functionality from the deep understanding of how Exchange Trading Funds (ETFs) work. In our first post, we discussed how we could use the ETF flows to predict subsequent daily ETF performance. In today’s article, we will analyze how we can use the information about the sensitivity of individual stocks to the ETF arbitrage activity to build a profitable equity factor trading strategy.

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