- Macroeconomics and Financial Markets
- Importance of Fiscal and Monetary Policy for Financial Markets
- Overview of Economic Indicators and their Uses
- Leading Economic Indicators and their Effects on Financial Markets
- Coincident Economic Indicators and their Effects on Financial Markets
- Lagging Economic Indicators and their Effects on Financial Markets
- Economic Integration and Global Financial Markets
We start with a review and analysis of modern macroeconomics from the perspective of the financial community, focusing on important issues such as growth, business cycles, inflation expectations, interest rates, trade and balance of payments deficits, government deficits etc. We also explain how fiscal and monetary policies are used as stabilization tools and discuss how these policies can affect the broad financial markets and market values of different asset classes.
We then take a closer look at how trends and cyclical behaviour of economic variables are reflected in various economic indicators. We give an overview of the different types of economic indicators and explain how they are classified according to direction (procyclical, countercyclical or acyclical) and timing (leading, coincident or lagging variable). Further, we look in more detail at examples of the various types of indicators, including “hours of production workers in manufacturing”, “new claims for unemployment insurance” (leading indicators), “index of industrial production”, “personal income”, and “value of new orders for consumer goods” (coincidental indicators), and “unemployment rate” (lagging indicator). We will go LIVE to follow the release of some of these indicators during the seminar!
In each case, we explain how the indicators should be interpreted, and we discuss how the release of new economic data can impact the value of financial instruments and investment projects. We also demonstrate how regression analysis can be used as a practical tool in conjunction with economic indicators and modelling to forecast industrial production, consumer spending and other important variables, and to identify linkages between various indicators. Further, we show how factor models can be used to estimate the effect on stock prices, interest rates and exchange rates of changes in these economic variables. We also give practical examples of possible profitable investment strategies based on the effects of forecasted/expected changes in economic indicators.
Finally, we present and discuss methods for calculating, interpreting and evaluating portfolio performance on an absolute and on a risk-adjusted basis. We explain measures such as “Time-Weighted Return”, “Sharpe Ratio”, “Information Ratio”, and “Sortino Ratio”, and we discuss their suitability in measuring the performance of investments with different risk-return characteristics.
(For simultaneous registration for this course and "Financial Time Series - Analysis, Modelling and Applications", the total fee for both courses is EUR 2,500)
