Studying history to manage expectations about the future comes with a truckload of caveats, but for rare events, such as the current coronavirus crisis, the past is one of few tools for developing perspective. The obvious precedent for the world’s current woes is the Great Influenza Pandemic of 1918-1920, which killed an estimated 39 million people around the world—roughly 2% of the population at the time. A National Bureau of Economic Research (NBER) paper, released earlier this month, digs deeper into that pandemic for insight into Covid-19 fallout that continues to wreak havoc on a global scale in 2020. Studying…

These are still early days for understanding the coronavirus (COVID-19) that’s threatening our health and roiling the global economy, but the first draft of analysis is starting to roll in. Among the first reviews is a new working paper that assesses how COVID-19 is influencing macroeconomic expectations. The crisis will reorder many facets of how the world thinks about markets and macro and quite a lot of the attitude adjustment will likely fall under the general topic of behavioral factors. As an initial inquiry into what will inevitably become a large and distinct body of research – file it under…

Clint Eastwood’s “Dirty Harry” character famously sneered that “a man’s got to know his limitations.” The same can be said of factor returns, which can be slippery beasts, especially in the short run. Factor premia typically look compelling in long-term profiles, but results are subject to volatility and more than a trivial amount of noise in any given year — and sometimes over longer stretches. That alone isn’t a reason to ignore factor-based strategies, such as momentum- and small-cap-focused portfolios. But the capacity for sharp price swings (beyond what’s experienced in the broad market) is a reminder that understanding how…

The arrow of progress in economic analysis usually rolls forward with time. Yesteryear’s insights give way to new wisdom as dismal scientists discover data sets, develop analytical tools, and devise new models. But sometimes the process works in reverse. To wit, a new paper makes use of a nearly century-old statistical tool that was originally designed to measure similarities in human skulls. What’s useful for cranium analysis appears expedient for tracking the economy’s ebb and flow, advise the authors of “A New Index of the Business Cycle,” written by researchers at MIT and State Street. The underlying concept is a…