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Macro Indicator: Early Warning & Crisis Prediction

Data Feed by Optimum Complexity

Added as Candidate: Oct. 14, 2019

Candidate Product
Candidate Definition
This product is in the review and/or onboarding process towards full availability. It is not currently available for purchase via FactSet.
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Highlights
  • Identify early warning signals not found in conventional models. Complexity analysis of macroeconomic indicators provides an efficient early-warning signal as it produces sharp spikes prior to market drops. Incorporate this information to establish more efficient shorting strategies.
  • Rely on a proven method. The same process and methods are used by the US Department of Defense to equip U.S Army mission-critical equipment. A rapid growth of complexity has been found to be a crisis precursor across many different industry sectors and can identify impending dangers in the financial markets.
  • Better manage risk and volatility. Optimum uses Quantitative Complexity Theory (QCT) to extract all linear and non-linear relationships between the tradeable components of a system (e.g. an index or investment universe) to construct investment portfolios. It requires no models and accounts for the nonlinearities and dispersion of data using entropy concepts, as opposed to standard deviations.
Feed Details
Evaluate the complexity of a country or region’s financial stability based on Quantitative Complexity Theory (QCT). Complexity analysis of macroeconomic indicators offers an efficient early warning signal as it produces sharp spikes prior to major market drops. Optimum has measured the complexity evolution of a pool of 30 region-specific macro indicators for the last 20 years and verified that prior to every major market drawdown there have been sharp complexity increases. Conventional methods are unable to identify such precursors.
Firm Information
Created in 2016, Optimum is the first company to measure complexity based on a proven model-free approach and to launch complexity-based investment strategies. Optimum uses proprietary technology and Quantitative Complexity Theory (QCT), a model-free measure of correlation created by company Co-founder & CTO Dr. Jacek Marcyk, to trade investment portfolios. Optimum also offers risk management advisory services to financial companies.