The Data Factory
Annual global spending on alternative data, estimated at US$7 billion in 2020, provides insights to all kinds of industry sectors. How can financial analysts participate in this burgeoning field? On March 3, 2021, the Professional Development Committee at CFA Society Toronto held a second panel discussion on alternative data. Alexandra Zvarich, representing the committee, asked the panellists about the role of alternative data especially in finance, where investors are constantly searching for new sources of alpha. “Alternative data is not new to finance,” said Abraham Thomas, Chief Data Officer and co-founder of alternative data firm Quandl. The firm provides financial, […]
Embrace the Alternative
In the world of finance, investors are constantly searching for new sources of information that could help them generate alpha. Many of them have recently turned to alternative data. But what, exactly, is alternative data? And why should investors (and those seeking a career in finance) care about it? On February 17, 2021, the Professional Development Committee at CFA Society Toronto convened a panel discussion to demystify the alternative data industry. Alexandra Zvarich, representing the committee, questioned the panellists about insights they could share, and how to prepare for a career in this area. “We worked with alternative data before […]
The Achilles Heel of Banking
After last decade’s financial crisis, regulators introduced several new measures to reduce systemic risk in the financial system. How are the new safeguards working? What are the implications for future balance sheet structure? The CFA Society Toronto convened a panel of three experts on November 25, 2020, to discuss the new regulatory capital and liquidity frameworks and how they are reshaping the way Canadian banks approach the market. The webinar, including a Q&A session, was moderated by Nigel D’Souza, Investment Analyst, Veritas Investment Research. “There’s no doubt the financial crisis changed balance sheets,” said Bruce Choy, Managing Director (Former Risk […]
Climate Risk Survey
Investors continue to ask for more investment strategies that target environment and sustainability. When it comes to capability to manage financial risks due to climate change, how far along are firms in addressing the issues? The second annual global survey of climate risk management at financial firms, sponsored by the Global Association of Risk Professionals (GARP), was presented in a webinar on September 22, 2020. The report is co-authored by Jo Paisley, Co-President, and Maxine Nelson, Senior Vice President at GARP. Paisley began by taking a quick poll of the audience, chiefly GARP members. “Why are you interested in the […]
Quality in the time of Covid
There’s a wide range of “quality factor” investing out there. How can the investor distinguish between the variety of methods? More importantly, how can the investor select the best factor method for given economic conditions? To answer this question, a recent paper compared the variety of methods, and examined how each method performed under different market conditions. The paper, “What is Quality?”, by Jason Hsu, Vitali Kalesnik, and Engin Kose, won the Graham & Dodd 2020 award for the best paper published in the Financial Analysts Journal in 2019. To celebrate the achievement, the journal invited the authors of the […]
“Disasters Everywhere”
What is the cost of a disaster? What is the cost of the business cycle? Economically speaking, how do business cycles compare with disasters? The cost of business cycles and the gain to be had from stabilization policy is a highly controversial topic in macroeconomics. Some believe the welfare gains from stabilizing the business cycle are extremely low and therefore not worth the effort. “Depression prevention and stabilization policies are central to the discipline of macroeconomics,” conclude the authors of recent research published by the Federal Reserve Bank of San Francisco. “Extreme and costly events are not the only reason […]
The Value of Data
What is the value of data? Who benefits from data? Can you construct a decent predictive model to manage risk if you have lousy data? Some enterprising souls have tried to sell their data back to the tech giants that collect and use big datasets. There are even some small companies such as CitizenMe and Datum that pay a user for taking a quiz or sending location data. “Data are far from becoming a standardized commodity whose value can readily be established through trades,” writes Diane Coyle, professor at University of Cambridge, in a report she tabled February 26, 2020, […]
Top 5 Trends in Risk Management
The champagne has been drunk, and the New Year has been rung in. What trends are predicted in risk management as we welcome the new decade? “In 2020, we’ll likely see significant changes in risk models, processes and functions,” predicts Brenda Boultwood, Risk Advisory Partner at Deloitte. As a senior expert in risk culture and corporate governance, she published an article online January 10, 2020, for the Global Association of Risk Professionals (GARP). We present the highlights and a link to the full article below. The three lines of defense business model, as we know it, will end This is actually […]
From brown energy to green
How will climate change affect the financial sector and the broader economy? What policy responses will mitigate climate change risks? Recently, the US Federal Reserve Bank (FRB) sponsored the first conference dedicated to exploring the economic and financial risks associated with climate change. “Climate change will have sweeping effects on our economy and financial system,” says the report summarizing the main themes of the conference. The report, released on December 16, 2019, was co-authored by Galina B. Hale, Òscar Jordà, and Glenn D. Rudebusch. Hale is a research advisor and Jordà and Rudebusch are both senior policy advisors at the Federal […]
Machine learning sniffs out corruption
“Bribery and corruption are by-products of risk culture,” said Aparna Gupta, Associate Professor at Lally School of Management at Rensselaer Polytechnic Institute. “We can take a step back and devise methods to detect it using textual data and machine learning.” Gupta was the second of two speakers at the one-hour webinar “Corruption and Corporate Governance” sponsored by the Global Association of Risk Professionals (GARP) on October 30, 2019. Since culture is intangible, empirical work on the relation between risk culture and risk management is limited. Traditional approaches for assessing risk culture have many drawbacks such as bias and lack of comparability. Nonetheless, […]