Data Diary

About

The objective of DataDiary is to track macro trends in earnings and valuations to provide a top-down view of the Australian equities market.  It blends analysis of economic activity with an aggregated view of risk appetite to form a view as to how the market is pricing earnings and assets across different sectors.

Measures of economic activity

We will seek to understand earnings trends in Australian companies by following leading indicators for economic activity in both the Australian and international markets.  The focus is on the drivers of revenues across industry sectors and how these are then flowing through to margins.

• Leading economic indicators (for example, building approvals, financing, retail sales, and aggregate indicators)
• Market based indicators (for example, the Baltic Dry Index and commodity price indices)

Measures of risk appetite

We then seek to model how the market is pricing these expected earnings by following key indicators of risk.  The goal is to gauge the impact of risk appetite on the pricing of equities.  Indicators we follow are:

• Inter-market risk spreads (for example, relative credit spreads and relative sector performance)
• Implied volatility (for example, in the equities market – VIX and in the bond market – MOVE)
• Market positioning (for example, the CBOE Put Call ratio and measures of volume and breadth)
• Broker expectations (for example, consensus estimates and share price forecasts)

About the author

The editor of Datadiary is Rohan Clarke.  Across 20 years in the financial markets, he’s worked in the equities, commodities, interest rate and foreign exchange markets.  The genesis of this blog was www.PazzoMundo.com.

Creative Commons License

This work by Rohan Clarke is licensed under a Creative Commons Attribution-ShareAlike 3.0 Unported License.
Permissions beyond the scope of this license may be available at DataDiary.com.au.