A fresh approach to assess macroeconomic risk

GOOD macroeconomic predictions and risk assessments are not easy to make, so maybe the problem should be reframed, not as an effort in prediction but as a process of learning to develop better macro judgment.

Macroeconomic investment research is generally focused on the short run and tied to market behaviour. It can be classified into three approaches to analysis – a quant school that links data to precise forecasts, a narrative school that talks through stories to provide macro awareness, and a hybrid school with narrative surrounded by supporting data.

With clear evidence that most macro forecasts are problematic, these approaches can be unsatisfying. Shocks, Crises, and False Alarms presents a new way of thinking about and framing macro risks that is refreshing.