Daily Archives: Jun 5, 2020 at 07:48 am EDT

Fat Tails Everywhere? Profiling Extreme Returns: Part II

It’s long been established that stock market returns aren’t normally distributed and that fat tails (extreme returns that are unexpected for a normal distribution) apply. This has implications, of course, for portfolio design and management. The first question: What are the choices for managing tail risk for equity exposures? There are many answers, each with a different set of pros and cons. Perhaps the first choice to consider: focus on longer-term results and look through the shorter-term noise. Is this a viable risk-management strategy? Let’s take a look at the data for insight.
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Macro Briefing | 5 June 2020

Is the slow rise in US coronavirus cases since Memorial Day noise? CNBC
US exports and imports down sharply in April due to coronavirus: WSJ
Jobless rate expected to soar to 20% in today’s employment report: Reuters
US warship sailed through Taiwan Strait on Thursday: Reuters
Deflation risk warrants further ECB bond buying, central banker says: BBG
Germany factory orders plunged in April: AP
People with type A blood more likely to suffer severe Covid-19 symptoms: NYT
New filings for unemployment continued to surge in the US last week: CNBC