Quants Corner: FX allocations quantitative strategy

EPFR Foreign Exchange Allocations dataset (FXA)

With a daily [trading] volume of over $5 trillion, the foreign exchange (FX) market is the largest investible market. One of the keys to success in this dynamic market is understanding where real money investors are positioned.

Our latest dataset, EPFR Foreign Exchange Allocations (FXA) offers investors unique access to the actual allocations of funds to individual currencies. FXA includes the precise EPFR Bullish Sentiment Indicator allowing investors to uncover allocations data from all G10 currencies, as well as the currencies of over 30 emerging and smaller developed markets. FXA data is released monthly on a T+38 basis, ensuring investors can act efficiently, effectively and with confidence.

Current datasets in the FX market are generally ‘noisy’ providing imprecise estimates leaving investors reliant on data prone to biases such as ‘representativeness’ and ‘responsiveness’ of respondents from surveys, or worse still, reverting to positioning data within exchanges or balance of payments, which have 60 to 90-day reporting lag times.

 

 

 

 

 

 

 

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At the turn of the century, investing in China was viewed as a risky proposition. Foreign access to a notoriously volatile, retail-driven equity market was heavily restricted. The lack of a credible regulatory framework and legal protections deterred US venture capitalists from making direct investments in Chinese companies. In many cases, Chinese banks and the country’s fledgling private equity industry also balked. So, when Chinese technology firm Alibaba received its first $25 million investment from Goldman Sachs in 1999, investors sat up and took notice.

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