Axioma Risk Monitor
Equity edition

China’s risk keeps falling, despite a slowdown in growth; Earnings Yield factor boosted by positive reports in the US; Euro drops but volatility remains low

We are excited to introduce our new China Equity Risk Model (CN4) into the CN Risk Monitor. For more details on this new model click here.



China’s risk keeps falling, despite a slowdown in growth


With steady market gains since the beginning of this year, China’s short-horizon risk continued to drop, despite news of a slowdown in the growth of the Chinese economy. The short-horizon risk forecast for the CSI 300 index declined more than 7 percentage points since the peak of 26% recorded in the beginning of November by Axioma’s newly released China model (CN4). China’s short-horizon risk fell 50 basis points last week, dipping to 19%—about 150 basis points lower than that of the US as of last Thursday. Even the medium-horizon fundamental forecast for the CSI 300, which held steady around 22% since November, ticked down last week, as measured by Axioma’s medium-horizon fundamental variant of the new CN4 model. At the medium horizon, China’s risk of 21% remained higher than the US’s risk of 17%.

See graph from the China Equity Risk Monitor as of 24 January 2019:


Earnings Yield factor boosted by positive reports in the US


The Earnings Yield style factor has seen steady gains in the US over the past three months. Both of Axioma’s US medium-horizon fundamental models—US4 All Cap (US4) and US Small Cap (USSC4)—recorded positive returns at the one-, three- and six-month horizons. However, the style factor posted a positive five-day return in the US4 model and negative in the USSC4 model, following the earnings reports that came out last week. The three-month cumulative factor returns were 2.49% and 3.19% for the US4 and USSC4, respectively. Earnings Yield had the highest three-month return (in absolute terms) among style factors in each of the US models. Despite the downturn last week, Earnings Yield in the USSC4 model also recorded the highest positive six-month return (1.99%), although low volatility stocks outperformed high earnings stocks over this horizon, with the Volatility factor posting a six-month cumulative return of negative 3.04%.

See graph from the US Small Cap Equity Risk Monitor as of 24 January 2019:



Euro drops but volatility remains low


The euro’s six-month return against the US dollar turned more negative last week, as the common currency reacted to the European Central Bank’s comments suggesting the possibility of new stimulus measures and warning of increasing economic risks. As expected by the market, the ECB kept interest rates unchanged. The euro’s six-month return against the US dollar was around negative 4%, positioning the common currency at the low-end of its six-month return range against the greenback. As of last week, the euro was the third-worst performer among major currencies over this period, after the Norwegian krone and Australian dollar. Still, the European common currency continued to be one of the least risky major developed currencies, and remained at the low-end of its six-month volatility range against the greenback, a position it has held for the past couple of months. The euro was the third least volatile developed currency (at 6%), behind the Singapore dollar and Swiss franc, as of last Thursday.

See graph from the Equity Risk Monitors as of 24 January 2019:



Stay Connected


Webinar | Evolving Priorities in Buy-Side Risk Management Technology

Date: February 6, 2019
Time: 11:00 AM ET / 4:00 PM GMT

In this webinar, we will discuss the challenges buy-side firms face and their top requirements for risk management technology.

Register here.

Webinar | Axioma Insight™ Quarterly Multi-Asset Risk Review

Date: February 7, 2019
Time: 11:00 AM ET / 4:00 PM GMT 

In this webinar, Christoph V. Schon, Axioma's Executive Director of Applied Research, examines how portfolio risk has changed from very little diversification in a climate of inflation fears to a ‘flight-to-quality’ environment entirely dominated by stock market volatility.

Register here.


On the Blog

5 things to look out for ahead of a yield curve inversion

Fears of an impending yield curve inversion—usually a harbinger of economic downturn—have been somewhat mitigated thanks to the recent downward revision of rate forecasts by a number of Federal Open Market Committee members.

Recessions, Expansions and Factor Performance: Not Much of a Factor-Timing Strategy

Given the recent inversion of the yield curve, and with companies like Apple guiding earnings estimates down, not to mention concerns about the impact of the US government shutdown and other issues, there’s more than just a whiff of a recession in the air.

Latest Research

Q4 2019 Insights: Risk Finally Rears Its Ugly Head

What a quarter, and year, it was. Most markets finished 2018 under water, while volatility soared around the globe. Our Applied Research Team offers a full debrief and analysis of risk during the year and Q4 in this whitepaper.

Crowded Trades Don't Explain Managers' Recent Pain

It has been a tough couple months for many managers, especially hedge funds. Some have speculated that there has been a large unwinding of crowded risk-factor positions. We do not see that in our factor returns, and instead propose a few other possible culprits.

The Year of the Central Banks

2019 will be a decisive year for three of the world’s biggest central banks. In this paper, we use the stress-testing capabilities of our Axioma Risk™ platform to examine the impact of rate hikes on a global multi-asset class portfolio, with a particular focus on equity and credit spread performance in response to a yield curve inversion.

In the News

AFTAs 2018: Best New Technology Introduced Over the Last 12 Months (Infrastructure)—Axioma

Axioma’s recently launched axiomaBlue platform delivered the win in the best new technology (infrastructure) category at this year’s AFTAs.

Axioma Announces New China Equity Risk Model

Axioma announces that it has released a new China equity risk model (AXCN4) as part of its next-generation Equity Factor Risk Model suite.


Axioma Risk Monitor

A Weekly Report on Market Risk

The Axioma Risk Monitor reports use Axioma’s solutions to bring you insights on trends in market and portfolio risk. You can subscribe to both the multi-asset class and equity edition here.


MiFID II Statement: Axioma believes that the research we provide falls outside the purview of the MiFID II regulations, which are intended to provide transactional transparency and unbundle research and trading costs. Axioma does not provide recommendation research, is not a regulated company and our business is not transactional. As such, we do not believe that we are subject to MiFID II regulation. For more information, please click here: MiFID II Statement.

Axioma  17 State Street, 2700    New York  NY  10004  United States