Since the financial crisis the concept of Risk On/ Risk Off market environments has gained a lot of attention. A number of indicators have been proposed to figure out the state of the market or ‘climate’. These generally focus on volatility, correlations, factor performance, fragility etc. This talk explores a few of them and examines their recent efficacy. It then discusses visualization and analytical tools to improve their usefulness and backtest performance.
The presentation will then propose additional tools to gain further insights into market regimes. The first is analysis in asset domain where the focus is on the similarity between time periods rather than between assets and the second is analysis of time series with different frequencies and lengths. These techniques are yet to be embraced by financial practitioners and the aim is to illustrate their application so as to spur more inquiry into these areas.