Quantfolio Sweden Macro Model

by Bjørnar Mundal, on 03 June 2020 14:14

 

NOSWEflag

We are continously working on making new macro models, and today we released a brand new model: Quantfolio Sweden Macro Model. Sweden was a natural step towards our goal of providing macro models to a wide range of countries around the world.

  • We have clients that are allocating assets to the Swedish market and requested a Swedish model
  • Sweden and Norway are important trade partners
  • We are in general interested in how our neighbours are doing 

Our clients get immediate access to our models. However, we also want the readers of our blog to get a status of the model. Continue reading to learn more about our method, see the status, and if you are interested, you can get a report sent directly to your mail box. It is simple, just click the button in the end of the post. 

Our methodology

Our Quantfolio Sweden Macro Model has the goal of giving an early warning on whether we are in a bear market or not. By combining our technology with vast amount of macro economic data, we analyze a wide range of macro economic indicators in order to find the indicators that has consistently been good at signaling that rougher times are coming. Our method of building a model consist of two steps: 

  • Step 1: Test single indicators and its performance. You will not find the perfect indicator which works 100 %, every time. However, you can find signals that has performed well historically
  • Step 2: We believe we can build a stronger signal by combining multiple signals. Therefore, we aggregate single indicators to composite models
When building models, we start broad and give every indicator a chance. However, only indicators with a proven track-record are included in our models: 

 

Trakten-2

For each indicator we take the available history and test it against historical bear markets. As part of the test, we use a range of well-known transformations and assess which transformation that has performed best:

Method2

Current status of the model: 

Speedometer 3

Indicators

As you can see from the pictures. Our Swedish macro model has BULL status. 6 out of 13 indicators are BULLISH. However, we are close to the threshold of 0.5, that seperates between BULL and BEAR

Top indicator for Sweden: 

After testing a wide range of indicators, we found 13 indicators that has performed consistently well in calling out bear markets. Moreover, we found that Sweden - Three Month Interbank Rate is the best, measured by F1 score from 1/1/1996 - dd. The picture below, shows the analysis done on that particular indicator: 

#1 indicator

Did you find this interesting? Remember to order the report by clicking the button below. By doing this, you will get more documentation and insights to the model, as well as the remaining indicators included in the model and the methodology illustrating why they were chosen. 

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Team Quantfolio

Topics:recessionbearmarketmacroeconomyeconomyfinanceSwedenRecession model