Quantifying Politics

We all know that politics impacts markets. However, it can be tricky to understand how to quantify political risk and use it as an input in the investing process. Here we take an updated look at the returns from applying Thorfinn’s political indices to trade a basket of macro assets. During our sample period from June 2018, an equally weighted strategy consisting of a passive long only macro basket and an actively traded basket using Thorfinn’s TSI index, has risk adjusted returns of 2.22 and drawdowns of 1.6%. This considerably outperforms a basket which is exclusively passive long only, which has risk adjusted returns of 0.88 and drawdowns of 14.4%.


To read the full Cuemacro/Thorfinn paper please click here!