Category Archives: Bitesize

Bitesize: More on the bond-equity correlation

Matt Roberts-Sklar.

In a previous post I showed that bond and equity returns are negatively correlated, having been positively correlated for most of the 18th-20th centuries. The time series was long (three centuries) and the chart was just for the UK, prompting two very reasonable questions: 1) does your story hold for countries other than the UK? and 2) what’s happened to this correlation recently?

Continue reading

1 Comment

Filed under Bitesize, Financial Markets

Bitesize: Banks’ growing capital surplus since the crisis

Peter Eckley and Liam Kirwin.

In the world of bank capital regulation, minimum requirements grab all the headlines. But actual capital resources are what absorb unexpected losses.  Banks and building societies typically hold resources substantially in excess of requirements – called the capital surplus. One reason is to avoid breaching the minimum due to unforeseen shocks. Another is to build resources in anticipation of requirements arising from growth or regulatory change. The chart shows how capital surpluses (on total requirements including Pillars 1 and 2, and all types of capital) have varied in recent decades. It is based on historical data from regulatory returns.

Continue reading

Comments Off on Bitesize: Banks’ growing capital surplus since the crisis

Filed under Banking, Bitesize, Financial Stability, Macroprudential Regulation

Bitesize: Global growth: The *old* normal?

Alexander Naumov.

“Too slow for too long”, referring to global GDP growth, was the title of a recent IMF publication. But is world economic growth really that slow? Looking at the data over the past several decades, global growth since the crisis does not appear particularly weak; at least not in a historical perspective

Continue reading

3 Comments

Filed under Bitesize, International Economics

Bitesize: America is not always like the rest of the world

John Lewis.

Macroeconomists like to use US data to test and develop theories- the coverage is generally very good, and the world’s largest economy is an obvious benchmark.  But what if the US happens to be very atypical in some respects?  For example the evolution of the income distribution…

Continue reading

Comments Off on Bitesize: America is not always like the rest of the world

Filed under Bitesize, Macroeconomics

Bitesize: Has the FOMC increased its focus on foreign risks?

Dan Wales and Emil Iordanov.

Have FOMC discussions changed since the end of 2015? Are the committee more concerned about international risks now?

Continue reading

Comments Off on Bitesize: Has the FOMC increased its focus on foreign risks?

Filed under Bitesize, International Economics, Macroeconomics, Monetary Policy

Bitesize: Understanding housing activity in real time

Christopher Hackworth, Nicola Shadbolt and David Seaward.

While official housing market statistics are relatively timely and high frequency, they usually come with a lag of at least one month.  So indicators that lead official estimates are helpful for identifying turning points, or any ‘shocks’ to the economy.

Continue reading

Comments Off on Bitesize: Understanding housing activity in real time

Filed under Banking, Bitesize, Macroeconomics, New Methodologies

Bitesize: Periodicity of GBP/USD trading activities

Jihyoung Yi.

FX assets are traded continuously across the globe.  The majority of GBP/USD trades, however, are executed during typical trading hours in London and New York (NY). Saravelos and Grover (2016) find that: (i) FX moves during these hours are most highly correlated to the overall daily move; and (ii) there is statistically significant periodicity where GBP tends to depreciate in the London morning and appreciate in the NY afternoon against the US dollar.

Continue reading

Comments Off on Bitesize: Periodicity of GBP/USD trading activities

Filed under Bitesize, Currency, Financial Markets, Financial Stability

Bitesize: 250 years of the bond-equity correlation

Matt Roberts-Sklar.

For most of the 18th-20th centuries, government bonds usually behaved like a risky asset. When equity prices fell, bond yields rose, i.e.  bond and equity returns were positively correlated (bond prices move inversely to yields). But since the mid-2000s, bond and equity returns have been negatively correlated, i.e. bonds became a hedge for risk. Before this, the last time this correlation was near zero for a prolonged period was the long depression in the late 19th century.

Continue reading

3 Comments

Filed under Bitesize, Economic History, Financial Markets

Bitesize: How 20-somethings are getting onto the housing ladder in London

Sachin Galaiya.

There are two ways people can make their resources go further when buying a home.

One is to increase the loan-to-value (LTV) ratio and hence increase the amount available to buy a house for a given deposit.

The other is to lengthen the term over which the mortgage is repaid, which increases the size of loan associated with a given level of monthly repayments.

Continue reading

2 Comments

Filed under Bitesize, Microprudential Regulation

Bitesize: Mapping the UK’s trade

Jonathan Fullwood.

With trade negotiations apparently looming, one may wonder with whom the UK trades most. Given the geospatial aspect of the data, perhaps a map may help. Even better, how about a cartogram?

Cartograms can be formed by distorting a map so that the areas of countries correspond to the relative values of some measure.

Continue reading

1 Comment

Filed under Bitesize, International Economics