Identifying Bellwethers Cuts Through The Noise (Video)

The following video interview offers new ideas and perspectives in a volatile world.

Video: Finding Bellwethers Amidst Volatility: Pandemic, War, and Higher Interest Rates Revelations

Accounting Professor Sean Wang speaks with Jennifer Warren about research that describes how markets move with volatility. Certain large firms are bellwethers that move with the market and describe it too. I liken this research to the rocket science of finance and markets. We delve into a good deal of markets commentary. A whole generation hasn’t seen higher interest rates; we (as reflected in the market) lose our minds periodically. The thematics follow:

Bellwether-ness (0:15)

Volatilities relay info to market (2:20)

Correlations (3:30)

IVC (implied volatility co-movements) a metric (5:58)

Incoming news (7:00)

Disney is high IVC firm (8:15)

Human capital guard change, brutal tech (10:10)

Chevron’s bellwether shift (11:15)

Energy vs. tech flip, QQQ v XLE (13:00)

Pandemic, tech, Bitcoin and memes (13:30)

Pandemic and interest rates flip switch (16:00)

Massive volatility: pandemic, war, energy map redraws, crazy recipe (16:45)

Finance rocket science, pulse of economy (20:40)

Dynamic metric (26:00)

Pre- and post-pandemic trades (27:00)

A whole generation never to know real cost of money (31:00)

Cash flow stories (32:00)

Losing our minds, LOL (32:00)

Intangible capital slashed (33:26)

Equilibrium, pandemic tech (34:00)

Real rates, e.g., Meta, pass on VR (35:40)

Lost knowledge capital (37:00)

A lot has happened on the planet (38:00)

Crypto, TikTok fallout (39:00)

Future research directions (41:00)

Energy strategies (43:00)

Benchmarking IVCs over time as competitive lens (44:30)

*The latest SSRN research paper is here. See figures in back.

A few summary points follow:

We find evidence that IVC proxies for the degree to which a firm’s incoming information is expected to correlate with that of the total market.

Firms with higher IVC have insider trades that are more strongly associated with future aggregate market returns.

Firms with higher IVC have stock returns that inform aggregate earnings surprises.

Firms with higher IVC have market reactions from the total market when they disclose their own earnings.

An earlier summary is here.