巴黎银行-拉美-金融市场-风险溢价模型：从风险到中性-20180312-9页_625kb

EM+Latam Strategy Summary

Core Content

This document outlines the analysis and insights provided by BNP Paribas regarding the risk premium model and its implications for market behavior, particularly focusing on the S&P 500 and the broader Latin American markets. The key takeaway is the model's ability to assess the probability of market corrections and rallies by evaluating the relationship between risk appetite and asset returns.

Main Viewpoints

• The risk premium model (BNPSGRP Index on Bloomberg) is used to gauge market sentiment and predict potential market movements.
• The model signals risk-off or risk-on based on the level of risk premium, which reflects the difference between the return of a risky asset and the risk-free rate.
• The model has been closely monitored to assess the likelihood of a market correction and subsequent rally.
• Key dates and model signals:
  • 16 January: The index was at very low levels, indicating high risk appetite or low risk. This suggested a high probability of a market correction.
  • 9 February/2 March: The model shifted to a bullish signal, advising to take risk. This coincided with a significant +7.9% rally in the S&P 500.
  • 12 March: The model returned to neutrality, indicating no abnormal divergence between risk and return in the market portfolio. This suggests that systemic overweight strategies should be scaled back.

Key Information

• The model is global in nature, and while the S&P 500 has generally followed its signals, other assets may behave differently.
• The model distinguishes between shifts in general risk and changes in risk appetite. Risk appetite is measured through the correlation between asset risk (variance, $\sigma^2$) and excess returns.
• The expected return of an asset is modeled as:
  $$
  \text{Expected Return} (Y) = \alpha + \theta (\sigma^2)
  $$
  Where:
  • $\alpha$ represents systemic or global risk.
  • $\theta$ is the level of risk appetite.
  • $\sigma^2$ is the variance of the asset.
• An increase in $\theta$ indicates an increase in risk aversion.
• To quantify changes in risk appetite, the report uses Spearman rank correlation instead of Pearson correlation, as it is more robust to non-linear relationships and extreme values.
• The report computes a rolling 1-month excess return for 23 different global assets and compares it with the level of risk ex ante.
• The model highlights that riskier assets (with higher variance) are more sensitive to changes in risk appetite.

Methodology and Approach

• The model is based on the assumption that risk premium is a function of:
  1. Risk or structural components/fundamentals.
  2. Appetite for risk.
  3. Systemic or global risk.
• The report emphasizes that risk appetite is not the same as risk. For example, a market may be low risk but high or low in risk appetite.
• The model is used to infer risk appetite from the correlation between risk ex ante and excess returns ex post.
• The analysis is based on public data and historical performance, with the caveat that past performance is not indicative of future results.
• The report includes important disclosures regarding conflicts of interest, legal compliance, and the nature of the communication as a marketing document, not investment research.

Legal and Compliance Notes

• This document is non-independent research and may be subject to conflicts of interest.
• It is a marketing communication intended for Relevant Persons as defined by MiFID II.
• The document does not constitute investment research and is not subject to any prohibition on dealing ahead.
• It contains hypothetical or back-tested performance and should not be used as a guide to future results.
• The document is confidential and may not be reproduced or distributed without prior written consent.
• It is also subject to regulatory disclosures in various jurisdictions, including the U.S., U.K., France, Germany, Belgium, and Ireland, which outline the nature of the document, the entities involved, and the legal restrictions on its use.

Conclusion

The model indicates that the market has returned to neutrality, suggesting that the current risk premium is in line with expected returns, and that there is no significant divergence. As such, systemic overweight strategies should be scaled back. The analysis underscores the importance of distinguishing between risk and risk appetite and highlights the use of a global risk premium model to guide investment decisions.