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Macro Trading and Investment Strategies: Macroeconomic Arbitrage in Global Markets


Some of the most successful and well-known hedge funds have long profited from a trading strategy that applies macroeconomic views to global markets: global macro. Pioneered by hedge fund managers such as George Soros and Julian Robertson, this strategy has led to enormous profits. By placing directional bets on liquid assets, it is particularly suited for trending markets.

In Macro Trading and Investment Strategies: Macroeconomic Arbitrage in Global Markets, Gabriel Burstein defines and rigorously analyzes this investment style. He then proposes macro arbitrage as an original alternative to trading subjective macroeconomic views at times when markets are either trending or are extremely volatile, lacking direction, and in crisis, such as during the Asian, Russian, and Latin American economic and financial collapses of the late 1990s. Macro arbitrage is introduced as a new, lower-risk, long/short macro strategy that is based on detecting objective macroeconomic mispricings in global markets. Burstein shows how this trading strategy works in stock market sector spreads (food retailers/general retailers, banks/utilities), stock index spreads (Italy/Spain, Sweden/Finland), and with the European Monetary Union (EMU) ahead of its 1999 single-currency final stage.

In Macro Trading and Investment Strategies, Burstein presents, with examples, the framework for traditional global macro strategies, then shows how to use macroeconomic mispricings in global financial markets to design innovative global macroeconomic arbitrage strategies for trading and investing.

Macro Trading and Investment Strategies is the first thorough examination of one of the most proficient and enigmatic trading strategies in use today-global-macro. More importantly, it introduces an innovative strategy to this popular hedge fund investment style-global macroeconomic arbitrage.

Dr. Burstein, an ex-Goldman Sachs macro proprietary trader who now heads a hedge funds-dedicated equity sales group at Daiwa Europe, proposes a new global macro strategy that is nondirectional and more objective. The classic global macro strategy utilizes macroeconomic information to anticipate market direction through subjective views. As a result, global macro has a strong subjective-directional component. Based on objective mispricings of macroeconomic information in stock market index and stock sector index spreads, a new long/short arbitrage strategy is presented here that capitalizes on the correction of objective macroeconomic mispricings. These macro arbitrage strategies are evaluated and tested in volatile markets such as the "domino effect" of the global financial crises of 1997-1998 that led to a hedge fund crisis. In fact, the book shows how global financial crises create strong macro arbitrage opportunities while also being a catalyst for correcting preexistent macro mispricings.

Macro Trading and Investment Strategies: Macroeconomic Arbitrage in Global Markets presents a new and compelling trading and investment strategy. Written in a clear and concise style, it includes definitions and carefully tested trading examples.Packed with revealing trading case studies, examples, explanations, and definitions, this comprehensive work covers:
* Global directional macro, long/short macro, and macroeconomic arbitrage trading and investment strategies
* Causes of macroeconomic mispricings in markets; tackling secondary macroeconomic variables in trades
* The importance of technical timing in macro arbitrage
* Volatility of macro arbitrage strategies versus volatility of relative-value strategies
* Mispricing opportunities due to the effect of the Asian crisis on global markets
* Macro arbitrage of the EMU convergence mispricing in equity markets
* Mispricings of retail sales, GDP, industrial production, interest rates, and exchange rates in stock markets

GABRIEL BURSTEIN, PhD, was a macro proprietary trader with Goldman Sachs. He currently heads Specialized Equity Sales & Trading at Daiwa Europe Ltd., London, a group he set up to sell European equity products to hedge funds based on long/short macro and relative-value ideas. He is a frequent speaker on new long/short macro strategies and the EMU at worldwide alternative investment and hedge fund conferences. Dr. Burstein received his PhD in mathematics from Imperial College of the University of London. He has had several papers published in mathematical control theory and in mathematical modeling in neurology, neuroendocrinology, and HIV immunology.
Introducton: From Subjective Macroeconomic Views to Objective Macroeconomic Mispricings in Global Markets.

Macro Trading and Investment Strategies.

Directional Marco Trading and Investment.

Long/Short Marco Trading Investment.

Macroeconomic Arbitrage in Global Markets: A New Marco Strategy.

Comparison Between Macroeconomic Arbitrage, Directional Macro, and Long/Short Macro Strategies.

Macroeconomic Arbitrage Based on Retail Sales Mispricings in Markets.

Causes of Macroeconomic Mispricings in Markets and Tackling Secondary Macroeconomic Variables in Trades.

The Importance to Technical Timing in Macro Arbitrage.

The Relation Between Macro and Micro Fundamentals in Macro Arbitrage.

Volatility of Macro Arbitrage Strategies versus Relative Value Strategies.

Macro Arbitrage Is Uncorrelated to Directional and Relative Value Strategies.

Macro Arbitrage Trading and Investment Based on Gross Domestic Product (GDP) Mispricings in Global Markets.

Macro Arbitrage Based on Interest Rates Mispricing in Global Markets.

Macro Arbitrage of Consumer Expenditure Mispricings in Global Markets.

Macro Arbitrage of Manufacturing Shipments Mispricings in Global Markets.

Mispricings of Asian Crisis Effects on Global Markets: When Macro Events Trigger Subliminal Market Relations.

Macro Arbitrage of EMU Convergence Mispricings in Equity Markets.

Macro Mispricings of Currencies (Exchange Rates) in Stock Markets.

Long/Short Macro Spreads and Macro Arbitrage Opportunities within the New EMU Euro Stock Markets.

Macro Arbitrage of Industrial Production Mispricings in Equity Markets.

Epilogue: Global Financial Crisis Domino Effect Corrects Macro Mispricings.