| 2010 |   | Brière M., A. Burgues and O. Signori, "Volatility Exposure for Strategic Asset Allocation", The Journal of Portfolio Management, 36(3), Spring 2010, p.105-116. |   |
| | | This paper examines the advantages of incorporating strategic exposure to equity volatility into the investment-opportunity set of a long-term equity investor. We consider two standard volatility investments: implied volatility and volatility risk premium strategies. To calibrate and assess the risk/return profile of the portfolio, we present an analytical framework offering pragmatic solutions for long-term investors seeking exposure to volatility. The benefit of volatility exposure for a conventional portfolio is shown through a mean / modified Value-at-Risk portfolio optimization. Pure volatility investment makes it possible to partially hedge downside equity risk, thus reducing the risk profile of the portfolio. Investing in the volatility risk premium substantially increases returns for a given level of risk. A well calibrated combination of the two strategies enhances the absolute and risk-adjusted returns of the portfolio. |
| 2009 | | Brière M. and O. Signori, "Do Inflation Linked Bonds Still Diversify?", European Financial Management, 15(2), March 2009. | |
| | | The diversifying power of inflation-linked (IL) bonds relative to traditional asset classes has changed significantly. In this paper, we study the dynamics of conditional volatilities and correlations for three asset classes, IL bonds, nominal bonds and equities, in the United States and Europe. Using a DCC-MVGARCH for the period 1997–2007, we highlight the change that took place in 2003. Although IL bonds once had definite diversification power, they are now highly correlated with nominal bonds and have reached similar volatility levels. As a result, the two asset classes are practically substitutable. This seems to be due to more stable inflation expectations and to a more liquid IL bond market. Although diversification was a valuable reason for introducing IL bonds before 2003, this is no longer the case. Dynamic portfolio optimization using our estimates of conditional correlations and volatilities clearly demonstrates that the optimal weight of IL bonds in a portfolio decreased sharply in 2003 in favor of nominal bonds and equities. |
| 2008 | | Brière M. and A. Szafarz, "Crisis Robust Bond Portfolios", The Journal of Fixed Income, 18(2), Fall 2008. | |
| | | This article defines a "crisis robust" portfolio that satisfies the minimal crisis-to-quiet time volatility ratio. This type of portfolio is less demanding for the investor than a regime-wise asset allocation. Although general, the concept of a crisis-robust portfolio is especially pertinent when applied to the bond market, which offers a flight-to-quality trade-off during crises (all volatilities increase but most correlations decrease). Using three categories of bonds (sovereign, investment-grade corporate, and high-yield corporate) in the U.S. and Eurozone for the 1998–2007 period, we demonstrate the composition of crisis-robust portfolios and discuss the stabilizing role played by low-quality bonds during crises.
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| 2006 | | Brière M., O. Signori O. and K. Topeglo, "Bond Market Conundrum: New Factors Explaining Long-term Interest Rates?", Banque et Marchés, 92, jan-feb 2008. | |
| | | Interest rates behaved highly atypically from 2004 to 2006. While the US central bank raised its policy rate at every meeting, long-term interest rates remained so remarkably stable that Fed Chairman A. Greenspan described their behaviour as a “conundrum.” Comparing long term rates to their theoretical level based on fundamental valuation model, we show that the anomaly was in average 40 bp. Various explanations have been put forward: investors’ changed attitude toward risk, and the rise in US Treasury purchases by different categories of buyers. We show that, if these variables could theoretically be responsible for bond risk premium decline, by incorporating them in a fundamental model of bond rates, they can explain less than half of the anomaly. Their recent changing influence could nevertheless justify their use for prospective analysis of bond rates. |
| 2004 | | Brière M. et K. Chancari, "Perception des risques sur les marchés: construction d’un indice élaboré à partir des smiles d’options et test de stratégies", Revue d’Economie Politique, 4, July-August 2004. | |
| | | Le but de ce travail est de construire un indicateur reflétant la perception des risques sur le marché et de tester si cette information permet d’élaborer des stratégies gagnantes. A partir des smiles d’options récupérés de façon quotidienne sur 5marchés (SαP 500, DAX, Nikkei, euro/$ et $/yen) sur la période octobre 1999— juin 2003, nous calculons chaque jour la distribution des anticipations (densité neutre au risque) sur chacun des marchés. Puis en comparant cette densité à la distribution historique des cours évaluée par la méthode des kernels, nous en déduisons l’aversion au risque des investisseurs. Cela nous permet de construire un indicateur de perception des risques pour chacun des 5marchés ainsi qu’un indicateur global. Nous testons la profitabilité de stratégies basées sur nos indicateurs. L’idée est de sous-pondérer notre portefeuille en actifs risqués (et de le sur-pondérer en actifs non risqués) quand l’aversion au risque est forte et d’inverser les positions quand elle est faible. Nous comparons les performances de nos portefeuilles-test avec celles d’un benchmark composé de 50% d’actifs risqués et non risqués et montrons que les signaux fournis par nos indicateurs de perception des risques permettent d’améliorer sensiblement les performances des portefeuilles, sauf dans le cas du marché des changes. |
| 2003 | | Brière M., "Les marchés réagissent-ils différemment aux signaux de la Fed et de la BCE ? L’information tirée des smiles d’options", Banque et Marchés, 67, nov-dec 2003. | |
| | | This paper compares the communication strategies of the Fed and the ECB and their impact on financial markets. Interest rates options were used to calculate daily probability distributions of market expectations and to examine how they are modified by central banks’ announcements. We found that Greenspan’s speeches have a stronger influence on rate levels and market uncertainty than Duisenberg’s. Moreover, market expectations most significant reaction is to economic indicators central banks mention as being important. Monetary decisions are regularly anticipated thanks to speeches and economic releases and the dominant speech themes were shown to be “monetary policy” and “domestic economy”. |
| 2009 | | Brière M., A. Burgues and O. Signori, "Volatility as an Asset Class for Long Term Investors", in Interest rate Modelling, Portfolio Optimisation and Quantitative Techniques for Central Banks and Sovereign Wealth Managers, Berkelaar A., Coche J. and Nykolm K. (ed.), Palgrave McMillan. | |
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| 2008 | | Brière M. and F. Ielpo, "Yield Curve Reaction to Macroeconomic News in Europe : Disentangling the US Influence", in Consequences of the European Monetary Integration on Financial Markets, Stavarek D. and Poloucek S. (ed), Newcastle : Cambridge Scholars Publishing, 2008. | |
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| 2006 | | Brière M., "Représentations conventionnelles sur les marchés de taux", in L’économie des conventions : méthodes et résultats (tome 2), sous la direction de F. Eymard-Duvernay, La Découverte, Paris, pp. 177-192.
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| | | Brière M. and O. Signori, “Inflation-Hedging Portfolios in Different Regimes”, in Asset Allocation for Central Banks and Sovereign Wealth Managers, Berkelaar A., Coche J. and Nykolm K. (ed.), Palgrave McMillan, 2010, forthcoming. | |
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| 2009 | | Brière M. and O. Signori, Inflation-hedging portfolios in Different Regimes | |
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| 2009 | | Brière M. and B. Drut, "The Revenge of Purchasing Power Parity on Carry Trades during Crises" | |
| | | Empirical evidence shows that fundamental models have produced disappointing results over the past 20 years while carry trade strategies have performed superbly. But the real picture is much more complex. In fact, the track records of both strategies have varied considerably. This article shows that they have actually alternated between periods of profitability and underperformance. It also shows that when carry trade strategies perform well, fundamental strategies do poorly, and vice versa. Crises appear to play a significant role in the alternation of investment styles on currency markets. In contrast to carry trades, fundamental strategies perform remarkably well in crises. A portfolio that rotates between these two types of strategies, based on a risk aversion indicator such as implied equity volatility, would substantially outperform a pure carry trade strategy. |
| 2008 | | Brière M., A. Chapelle and A. Szafarz, No contagion, only globalization and flight to quality | |
| | | In this article, tests for globalization and contagion are separated using an ex ante definition of crises, and contagion tests are neutralized with respect to globalization effects. A large database is constructed to study the stability of correlation matrices for four asset classes: equities, government bonds, and corporate bonds –investment grade and high yield – in four geographical zones. Overall, the results confirm the instability of correlations and point to a combination of globalization and flight to quality, while emphasizing that contagion on the equity markets appears as an artefact due to globalization. |
| 2008 | | Brière M., A. Chapelle and A. Szafarz, "No contagion, only globalization and flight to quality"
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| | | In this article, tests for globalization and contagion are separated using an ex ante definition of crises, and contagion tests are neutralized with respect to globalization effects. A large database is constructed to study the stability of correlation matrices for four asset classes: equities, government bonds, and corporate bonds –investment grade and high yield – in four geographical zones. Overall, the results confirm the instability of correlations and point to a combination of globalization and flight to quality, while emphasizing that contagion on the equity markets appears as an artefact due to globalization.
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| 2008 | | Boulier J.-F., M. Briere and J.-R. Viala, "Do Leveraged Credit Derivatives Modify Credit Allocation?" | |
| | | This paper examines how credit derivatives have changed the construction of an efficient portfolio. Credit derivatives provide a way of gaining exposure to credit risk alone, to the exclusion of interest rate risk. They also permit a relatively easy use of leverage. We examine two types of allocation: the first is a conventional investment in government bonds, corporate bonds (investment grade and high yield) and equities in the United States; the second replaces corporate bonds with credit derivatives, which may also be leveraged. We look at past data on returns, risk and correlations of these investments, and we show that the credit risk component seems to have a strongly diversifying effect relative to the traditional asset classes, i.e. equities and government bonds. We then compute efficient frontiers within a standard mean-variance framework. The results show the advantages of credit derivatives for portfolio diversification, and the usefulness of leveraging this investment to extend the limits of the efficient frontier. |
| 2006 | | Brière M., "Market Reactions to Central Bank Communication Policies : Reading Interest Rate Options Smiles" | |
| | | This paper compares the communication strategies of the Fed and the ECB and their impact on financial markets. Interest rates options were used to calculate daily probability distributions of market expectations and to examine how they are modified by central banks’ announcements. We found that Greenspan’s speeches have a stronger influence on rate levels and market uncertainty than Duisenberg’s. Moreover, market expectations most significant reaction is to economic indicators central banks mention as being important. Monetary decisions are regularly anticipated thanks to speeches and economic releases and the dominant speech themes were shown to be “monetary policy” and “domestic economy”. |
| 2006 | | Brière M. and A. Cohen, "A quoi réagit le marché des obligations privées?" | |
| | | Nous avons étudié quelles annonces économiques font significativement réagir le marché des obligations privées aux Etats-Unis. Nous avons mesuré l’impact sur 1 jour d’une trentaine d’annonces macroéconomiques sur les spreads de crédit, en affinant notre analyse grâce à une décomposition sectorielle et par rating. Nous trouvons qu’une liste restreinte de chiffres économiques fait réagir les spreads : quelques indicateurs d’activité (ISM, Chicago PMI), de confiance des consommateurs, d’inflation et d’emploi. Cette liste est très proche des chiffres qui font réagir les obligations d’Etat. Les résultats diffèrent assez fortement selon les ratings. Alors que les indicateurs cycliques économiques font fortement réagir les spreads de crédit High Yield, leur impact sur les spreads Investment Grade est beaucoup plus limité. C’est le contraire pour les chiffres d’inflation et les annonces de taux directeurs, qui font surtout bouger les spreads Investment Grade. Ces résultats peuvent s’expliquer par la plus grande vulnérabilité à la conjoncture économique des émetteurs les plus risqués, et aux clauses de désendettement spécifiques aux émissions High Yield. Notre étude permet également de mettre en évidence une disparité sectorielle des réponses des spreads de crédit aux annonces économiques. Le secteur de la finance est surtout impacté par les annonces de taux directeurs et celles reflétant la santé financière des consommateurs (confiance, dépenses personnelles, emploi). Le secteur des Utilities (services aux collectivités) est très impacté par les stocks, l’inflation et quelques indicateurs d’activité (Chicago PMI, production industrielle). Enfin, au sein des 8 sous-secteurs de l’industrie, il convient de distinguer les secteurs cycliques, très liés à la conjoncture et fortement influencés par les variables d’activité, des secteurs plus défensifs, qui réagissent à un nombre plus restreint d’indicateurs. |
| 2009 | | Brière M., "La volatilité, une classe d'actifs pour les investisseurs à long terme", Revue Banque, juin 2009 | |
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| 2009 | | Brière M., “Pourquoi les taux longs ne remontent plus”, Option Finance, novembre 2009. | |
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| 2009 | | Brière M., “Vers Plus de différenciation entre pays européens après la crise”, revue Banque, décembre 2009. | |
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| 2009 | | Brière M., B. Drut, and H. Dänner, “Währungsstrategien in Krisenzeiten”, Absolut Report, 50, Jul-Aug 2009. | |
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| 2008 | | Brière M., “La crise génère aussi des anomalies sur les marchés obligataires”, Revue Banque, décembre 2008. | |
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| 2008 | | Brière M., A. Chapelle and A. Szafarz, "Diversifier en temps de crise", La Libre Belgique, septembre 2008. | |
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| 2008 | | Brière M., “Are Inflation-Linked Bonds good for your portfolio?”, International Investment, August 2008. | |
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| 2008 | | Brière M., “Quel pouvoir de diversification offrent les obligations indexées à l’inflation ?”, Revue Banque, juin 2008. | |
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| 2008 | | Brière M. and A. Szafarz, “Optimizing Bond Portfolios through the cycle of financial crises”, Global Pensions, 2008.
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| 2008 | | Brière M., “Débouclement des positions de carry trades”, Revue Banque, février 2008. | |
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| 2008 | | 8 septembre 2008, Brière M., A. Chapelle and A. Szafarz, “Diversifier en temps de crise”, La Libre Belgique. | |
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| 2008 | | March 2008, Brière M. and A. Szafarz, “Optimizing Bond Portfolios through the cycle of financial crises”, Global Pensions. | |
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| 2007 | | Brière M., "Que nous enseigne l'analyse des précédentes crises financières ?", Revue Banque, décembre 2007. | |
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| 2007 | | Brière M., "Un nouveau flight to quality sur les marchés", Revue Banque, juin 2007 | |
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| 2006 | | Brière M., "Le déclin de la volatilité sur les marchés est-il durable ?", Revue Banque, dec 2006. | |
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| 2006 | | Brière M., "Et si la volatilité économique jouait pour expliquer le comportement des taux longs ?", Revue Banque, juin 2006 | |
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| 2006 | | Brière M., "Les chiffres économiques importants sur les marchés de taux ont évolué au gré des préoccupations des banques centrales", revue Banque, mars 2006 | |
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| 2005 | | Brière M., "Marché obligataire, bulle ou changement économique structurel ?", Revue Banque, sept 2005. | |
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| 2004 | | Brière M., "L’influence des représentations collectives sur les marchés de taux, le rôle des banques centrales et des experts", Vie et Sciences Economiques, 165, Juin 2004. | |
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