Featured Insights

Research and Publications

INSIGHTS
by First Quadrant Team
Even in this historically-long bull market, we have seen (not-infrequent) shifts in investors’ risk sensitivity, ranging in both magnitude and duration. The past several months have been a particularly obvious reminder that risk appetite can shift abruptly, with volatility oscillating as market participants assessed global growth prospects, Brexit developments, trade uncertainty, and the US government shutdown. At First Quadrant, we believe the best way to understand how changes in the market environment will influence asset prices is to first understand how they will influence market participants.
INSIGHTS
by First Quadrant Team
The financial market is an incredibly rich and complex space, and academics and practitioners alike have dedicated enormous effort into understanding its forces. It is perhaps surprising, then, that few have focused on the forces that drive the individuals who come together to create the market. Many treat market participants as a homogenous group, all motivated by a singular desire to maximize profit. But of course, different market participants have different needs and preferences – sometimes even during the same trading session!
INSIGHTS
by First Quadrant Team
“Red October” served as a jarring reminder that exposure to equity beta must be managed to meet most investment objectives. A simple way to manage risk might be to reduce exposure when prices fall below a certain level. But selling into a falling market is costly, and if the market rebounds, you have locked in losses.