A third scenario modeling evergreen: Asset Classes and Business Cycles
At Ortec Finance we have been building and applying Economic Scenario Generator (ESG) models for decades, aimed at enabling people all over the world to manage the complexity of investment decision making. Over the years we have done a lot of R&D around this topic, and shared the results through various conference presentations. Although some cases are more than a decade old, the content of these “scenario modeling evergreens” is still very relevant today.
After VAR Models Do's and Don'ts and A Zero Phase Shift Band Pass Filter, a third such presentation from 2012 covers the relations between asset classes and business cycles. Business cycles are a defining characteristic of the movements on medium-term horizons in asset prices, volatilities and yield curves, as well as in the broader macro-economic environment. This presentation shows why it is paramount to take business cycles into account when making investment decisions and illustrates how this can be done based on the one-of-a-kind frequency domain methodology that we use for generating scenarios.
Today, incorporating cyclicality is still an unrivalled feature of the Ortec Finance stochastic economic and asset return scenarios. We are happy to share with you our insights about why this is so important. Click here for our latest business cycle outlook and here to find out more about our Economic Scenario Generator (ESG) models.