MTCAP - Macroeconomic Trends, Cycles, and Asset Prices

Unit Director: Carlo Favero

The research unit Macroeconomic Trend, Cycles and Asset Prices - MTCAP focuses on the decomposition of macroeconomic and policy variables, in particular monetary policy, in trends and cycles to assess their effects on asset prices and asset returns. The units works mainly on three projects.

Project 1: Trend and Cycles in short-term rate and term structure

The decomposition of short-term rates in their trend and cycle components is useful to undestartand current monetary policy, predict future monetary policy, and to scutinize the reaction of the bond and the stock market to the decisions of the monetary policy makers. 

Project 2: Macro Trends and Factor Timing 

The project helps to understand the interaction between macroeconomic variables and asset prices and provides evidence of predictability that can be used for asset allocation and portfolio risk management. 

Project 3: Use of LLM to analyze central banks communication and its impact on asset prices

This project focuses on two research questions: 

• Can Large Language Models (LLMs) be used to improve financial and macroeconomic forecasting and information processing?
• Can LLM team agents build meaningful pricing factors at the central bank level based on news and institutional documents?