Noise is unwanted sound. For investors it is those pieces of data, stories, or even price moves, which may seem like information but actually tell us nothing about the future returns of an asset. Trading on noise can be hazardous to your wealth.
In Market Noise we hope to identify examples of noise which may be prevalent in an era of exponentially growing data and obsession with the short term. Why? To try not to fall victim to noise in our own decision making. Because human beings love stories noise can be highly seductive. We must always be on our guard and looking for examples of noise is just one step towards doing this.
A week on, where are we?
Friday 24th June feels like a long time ago – so much has happened since then. Sterling has dominated the headlines here in the UK. It has risen a little from the initial post-Brexit low of 1.312 against the dollar, but is still down… Read the article
Markets have recently experienced some heightened volatility, which at times has been explained by commentators as being due to the changing expectations around the outcome of the UK referendum. Last week, equity markets globally experienced losses, while ‘safe haven’ assets, such as G7 government bond markets, rallied. The biggest currency… Read the article
Behavioural Finance Markets
All over the UK and Europe fund managers are being asked for their views on Brexit. Many will answer: ‘we don’t forecast.’ The more ambitious might add: ‘markets don’t like uncertainty, so volatility might create opportunities.’
As human beings we find these same old clichés deeply unsatisfying; we want to… Read the article
In Robert Louis Stevenson’s short story “The Bottle Imp” a man is sold a demonic bottle which grants the owner the power to gain all he desires. There are just two catches; first, if he should die with the bottle still in his possession he will be condemned… Read the article
‘When markets move a lot there must be a reason why.’ Most of the time this mind-set works well for us: there is an earnings announcement, policy decision, or macro data release, and markets appear to respond (sometimes) in the way you would expect.
Other price moves are not so… Read the article
We define episodes as phases where emotion drives asset prices. It is a name that has come in for criticism: some think it has associations with mental disorder; others think of TV shows. It doesn’t score well in marketing focus groups.
But we think it is an apt description of… Read the article
So after one of the most eagerly anticipated FOMC meetings ever, at last we know…that we still don’t know when the US Federal Reserve (the ‘Fed’) will raise rates.
It looks like some traders have been waiting in vain for exciting news from the Fed, which has decided… Read the article
Apparently there is a 40% chance that Greece will leave the EU. Or there’s a 25% chance, or an 80% chance. Alan Greenspan says it is just a matter of time. George Soros says it’s 50/50. UK bookmaker William Hill has stopped taking… Read the article
On Tuesday the FTSE 100 index reached price levels last seen at the top of the tech bubble.
This has grabbed some attention in an investment media always hungry for content, and it is the type of headline that appeals. It is factually correct (which always helps) but… Read the article
A Bloomberg headline yesterday provided the breaking news that the “ECB Bolsters Economic Recovery”. The article covers the latest European Purchasing Managers’ Index (PMI) numbers from Markit Economics, which indicate expansion in much of the Eurozone.
We believe the longer-term trend in European PMIs is a reasonable indicator… Read the article