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LUO’S QES MONTHLY NEWSLETTER

Quantitative Research
Economics
Portfolio Strategy

March 2018 QES Newsletter

Tone at the top? Quantifying Management Presentation
EDITORIAL

The March Edition

Welcome to the March edition of our monthly newsletter. The aim is to make it easier to access all of our published research in the past month. We summarize our most topical papers to keep you abreast of our latest work. We also highlight the latest news and investment themes with respect to Quantitative Investing, Economics, and Portfolio Strategy (QES).
FEATURED

Stocks and Industries with Exposures to US-China Trade Conflict

On March 22, USTR announced President Trump’s decision on the trade measures against China under Section 301, including punitive tariffs on $60 billion annual imports. The renewed trade conflicts send a chill through the global market. In this note, we attempt to understand the economic impact of these events. Click here for the full report.

EDITOR’S NOTE

Yin Luo, CFA, CPA
YLuo@wolferesearch.com
Gaurav Rohal, CFA
GRohal@wolferesearch.com
QES Desk Phone: 1.646.582.9230
Luo.QES@wolferesearch.com

Wolfe

London Conference

We are excited to invite you to the Wolfe Research Luo’s QES 2018 Global Quantitative and Macro Investing Conference in London on June 8th at the Andaz Liverpool Street. The conference will feature the latest academic research on how to best harness alpha from alternative Big Data and machine learning techniques, for both bottom-up stock selection and top-down global macro. We will showcase how fundamental investors can take advantage advanced analytics in their investment process

Please contact the Wolfe Research conference team at conferences@wolferesearch.com
STOCKS MOST EXPOSED TO RISING INTEREST RATES
In this report, we develop a model to measure interest rate sensitivity at the single stock level and provide a list of names that are most negatively exposed to rising interest rates. We analyze the market reaction to Fed rate hikes. Market volatility tends to escalates around FOMC meetings, but eventually, the market shrugs off the rate hikes and continues the rally.


To systematically measure a company’s interest rate sensitivity, we introduce a machine learning based model – SIRC, accounting for the shifts and twists of the yield curve. Based on our SIRC measure, we provide a list of stocks that are likely to be the most negatively impacted by rising rates.

A Research Series for Fundamental Investors – “Portfolio Compass”

QES Desk Phone: 1.646.582.9230
Luo.QES@wolferesearch.com
TWIN DEFICITS
World Trade is NOT a Zero-Sum Game. In this report, we try to understand the implications of current account balance on the economy and financial markets. Statistical analysis suggests that the prosperity of both US and China depends on international trade. Furthermore, historical data reveals that US current account balance actually benefits from a robust world trade. Click here for full report
Our model hints that US current account balance is likely to improve, on the back of a weak US dollar and strong Chinese economic growth. Therefore, the impact from any proposed trade tariffs, similar to other policy interventions, are likely to be lagging.

REGIME-BASED INVESTING

Fed Policy, Sector Timing, Style Rotation and Positioning your Portfolio.
The US economy is heading for uncharted waters. The US federal government is injecting tremendous stimulus via tax cuts and infrastructure spending, at a time when the economy is already at full employment. At the same time, the Federal Reserve, under its new Chairman, is pushing for tighter monetary policy. In this research, we use an economic cycle/regime model to understand the implications to asset allocation, sector and style factor rotation decisions.

We study the key drivers of interest rates – Fed policy, supply of treasury bonds, and demand of safe-haven assets. Volatility has returned to markets, amid these frequent market reversal episodes, our sector timing and style rotation models delivered a highly accurate prediction. Click here for the full report

Interested in our Portfolio, Infrastructure, or Custom Solution Services?


QES Desk Phone: 1.646.582.9230
Luo.QES@wolferesearch.com
TRADE WAR, NORTH KOREA CONFLICT, NO WAR AFTER ALL
US government’s decision to impose steel and aluminum tariffs has raised the fear of global trade wars. In this report, we systematically assess the impact of trade tensions and geopolitical risks on asset prices. To help investors measure the level of trade tension, we offer three proprietary US and Global Trade Tension Indices. Click here for the full report
We introduce the Geopolitical Risk Index (GPR Index), which measures geopolitical tensions by counting relevant keywords in leading international newspapers. In the case of a full-blown global trade war, most risky assets plummet, while safe-haven assets such as US Treasury bonds provide the best downside protection.

Screens, Models and more...

Interested in any screens or models?
  • Objective, Systematic, Customizable, and Transparent Stock Screens
  • LEAP: Our flagship machine learning based global stock selection model
  • SMAP: Forecasting M&A targets using Alternative Data
  • CSI: Systematically identifying companies with accounting and governance irregularities
  • SPEC: Analyzing textual component of company filings for red flags
  • MRM: Objectively identifying companies with the greatest likelihood of margin expansion
  • Factor Performance: Daily factor performance
  • SMEC: Systematic Mining of Earnings Calls (SMEC) Stock Screen
  • SIRC: Interest Rate Sensitivity (SIRC) Stock Screen
Reach out to us for any assistance with your modeling or screening needs.
QES March Seminars and Lunches
Luo’s QES Team, in the past month, hosted a series of lunches and seminars in Boston, London, and Chicago to present our recent research. More than 100 buy-side professionals attended these events.

Please note that we are hosting our 2018 Annual Global Quantitative and Macro Investing Conference in London on June 8th. For details, please contact sales@wolferesearch.com.
Upcoming Conferences, Entertainment, & Travel
Event Date Organizer Location
CQA Spring 2018 04-Apr CQA - Chicago Quantitative Alliance Las Vegas
8th International Conference on MATHEMATICAL AND STATISTICAL METHODS FOR ACTUARIAL SCIENCES AND FINANCE 04-Apr Universidad Carlos III de Madrid Madrid
Princeton-Rutgers Math Finance Day 2018 07-Apr Rutgers Mathematics Department New Brunswick
EFA 2018 Meeting 11-Apr Eastern Finance Association Philadelphia
FOW Derivatives World 2018 11-Apr Global Investor Group Hong Kong
MathFinance Conference 2018 16-Apr MathFinance Frankfurt
Middle East Investment Conference 2018 17-Apr CFA Institute Cairo
Global Finance Forum 2018 19-Apr SIFMA Washington DC
5th Annual Hedge Fund China 2018 21-Apr Hedge Fund China Shanghai
Princeton Fintech and Quant Conference 21-Apr Princeton University Princeton
Uncommon Knowledge 2018 22-Apr National Association of Active Investment Managers Orlando
QES Seminar San Francisco 2018 24-Apr Wolfe QES San Francisco
The Big Data & Machine Learning Revolution 24-Apr RavenPack London
TradeTech EU 2018 25-Apr Worldwide Business Research Paris
STAC Summit Spring London 2018 26-Apr STAC London
Quantcon NYC 2018 27-Apr Quantopian New York
QES New York Group Lunches 2018 07-May Wolfe QES New York
The Trading Show Chicago 2018 09-May Terrapinn Chicago
Risk ASEAN 2018 09-May Risk Jakarta
2018 Quantitative Risk Management & Financial Analytics Workshop 10-May Telfer School of Management Ottawa
2018 Applied Finance Conference 11-May FMA International New York
3rd PKU-NUS Annual International Conference on Quantitative Finance and Economics 12-May Peking University HSBC Business School Beijing
71st CFA Institute Annual Conference 13-May CFA Institute Hong Kong

LOCAL AND INTERATIONAL NEWS

Over 500 buy-side investment professionals attended our 2017 QES Conference.
View the Conference Proceedings

TechByte

ETL has been a word thrown around in the data science community. However, its usage and meaning are ripe for interpretation and misinterpretation. ETL stands for Extract, Transform and Load, the three pillars of any data warehousing infrastructure. The word ETL has stood firm despite recent shuffles in technology stack. The underlying technologies have changed, but the need to move data from the collection system (OLTP) to insights system (e.g., OLAP) is still powered by scalable ETL processes in the data science community.

ETL: Extract Transform and Load