Forward Guidance
Marko Papic: Russia-Ukraine War Is Effectively Over, Israel-Hamas War Unlikely To Have Large Market Impact
Episode guests
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Quick takeaways
- Geopolitical events can be mispriced, providing opportunities for generating alpha in the market.
- The Russia-Ukraine conflict is likely to remain frozen with limited impact on broader markets.
Deep dives
Geopolitical Alpha: Understanding the Interplay of Geopolitics and Investments
Geopolitical alpha is the concept of generating alpha in the market by mispriced geopolitical events. Geopolitics should not be seen as exogenous, but rather as an endogenous variable in investment decision-making. The market often overreacts to geopolitical events, creating opportunities for investors to generate alpha. The importance lies in identifying whether the market has overreacted and taking advantage of mispricing. The speaker emphasizes the need to have a framework for thinking about geopolitics and understanding material constraints to conflict. In the case of Russia-Ukraine conflict, for example, the conflict is likely to remain frozen as both sides face constraints and lack the capability and political support for further offensive operations. The market has already priced in the geopolitical risk and the conflict's impact on broader markets has been limited.
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