Insights | Research from State Street Markets

Nov 12, 2025

Confidence Revisited: The Distribution of Information

By Megan Czasonis, Mark Kritzman, Fangzhong Liu, and David Turkington Relevance-Based Prediction can assess a prediction’s reliability from the consistency of the information that forms it, providing a novel perspective that complements conventional measures of confidence. Prediction is like a voting process. Each datapoint casts a “vote” for the unknown outcome, and the final forecast averages these diverse views. But to know how confident we should be in the average, we need transparency into ...

Oct 14, 2025

The Fallacy of Concentration

By Mark Kritzman, and David Turkington Evidence shows that concentrated market capitalization weights do not make an index riskier, because larger stocks are inherently more diversified and their increased weights are offset by their lower volatility compared to small stocks. The dominance of large tech firms in market-cap-weighted indices has sparked recent concern about concentration risk, but historical data and empirical analysis suggest these fears may be unfounded. A review of nearly 90 ...

Sep 23, 2025

Permanent Capital Meets Private Markets

By Alexander Cheema-Fox, Megan Czasonis, Piyush Kontu and George Serafeim We analyse the transformative impact of life insurance platform integration on the business models, financial profiles, and market valuations of prominent alternative asset managers (AAMs). Relying on episodic fundraising through closed-end funds has long defined the growth and operating model of alternative asset managers (AAMs). Many firms have depended on periodic capital commitments from institutional investors, which, ...

Sep 9, 2025

Stocks for Inflation Shocks

By Megan Czasonis, Ding Li, Grace (TianTian) Qiu, Huili Song, and David Turkington We present an adaptive method for constructing an inflation robustness equity factor which outperforms attribute- and sector-based strategies during 65 inflation events from 2008 to 2025. We introduce a novel framework to identify which equities will prove robust and which will falter during episodes of inflationary stress. By analyzing firm-level attributes and comparing them to historical performance during ...

Aug 22, 2025

Flight to Safety or Flight from Carry?

By Alexander Cheema-Fox, Edward S.Cuipa III, and Robin Greenwood Institutional investor flows can help distinguish between flights to safety and flights from carry, revealing that the CHF, JPY, and USD play distinct roles depending on interest rate differentials and whether market stress is driven by macroeconomic uncertainty or funding pressure in currency markets. We examine the roles of safe-haven and funding currencies during market stress by analyzing how institutional investors reallocate ...

May 6, 2025

Replacing Cross-Validation with Interrogation

By Megan Czasonis, Yin Li, Huili Song, and David Turkington Our innovative "interrogation" method detects unreliable machine learning predictions in advance, overcoming limitations of the traditional cross-validation method. We introduce a new method called "interrogation" to warn when a machine learning model has underfit or overfit a data sample, offering a more efficient alternative to traditional cross-validation. Unlike cross-validation, which can be cumbersome and computationally expensive, ...

Apr 15, 2025

Prediction with Incomplete Information

By Megan Czasonis, Mark Kritzman, and David Turkington We show that relevance-based prediction offers an elegant solution to the problem of incomplete data, preserving valuable information and enhancing prediction reliability in a way that is not possible using traditional models. When setting out to form data-driven predictions, it’s common to encounter incomplete information, such as a time series with shorter history lengths or observations with missing data. Traditional methods for addressing ...

Feb 5, 2025

Relevance-Based Importance

By Megan Czasonis, Mark Kritzman, and David Turkington As the race to design sophisticated data analytics continues, we show why relevance-based prediction offers an ideal way to measure the importance of an input variable to a prediction. T-statistics act as a hallmark for rigor by pinpointing the effect of a single variable and distinguishing signal from noise. However, they have significant limitations: (1) t-stats do not capture ‘shared’ information, (2) t-stats are not prediction-specific, ...

Nov 18, 2024

The Economic Logic of Large Language Models

By Megan Czasonis, Huili Song, and David Turkington We show that LLMs can effectively extrapolate from disparate domains of knowledge to reason through economic relationships, and that this may have advantages over narrower statistical models. Fundamentally, large language models (LLMs) and numerical models both learn patterns in training data. However, while traditional models rely on narrowly curated datasets, LLMs can extrapolate patterns across disparate domains of knowledge. In new research, ...

Oct 21, 2024

How do Global Portfolio Investors Hedge Currency Risk?

By Alexander Cheema-Fox and Robin Greenwood Using a uniquely deep proprietary dataset, we detail how global investors across regions and asset classes hedge their currency risk, stick to their hedges, and adjust their hedging targets over time. Currency risk is a key component of global investor returns, but different categories of investor approach these exposures differently. Using State Street’s proprietary custodial data, we have a uniquely precise view into how investors actually choose ...

Oct 7, 2024

State Street 2024 Summer Sessions

2024 State Street Summer Sessions Webinar Series This summer we reviewed the fundamentals of finance and investing! Even the most sophisticated investors can benefit from an occasional tune-up. For our fourth annual State Street Summer Sessions, our team of academic and industry experts went back to basics, covering the core principles of modern investing. Connecting theory to practice, our Global Markets research experts and academic partners covered topics such as inflation, liquidity, private ...

Oct 7, 2024

State Street 2024 Foundations of Investing Seminar Series

Join us for the 2024 State Street Foundations of Investing Seminar Series This year we reviewed the fundamentals of finance and investing! Even the most sophisticated investors can benefit from an occasional tune-up. For our fourth annual State Street Foundations of Investing Seminar Series, our team of academic and industry experts went back to basics, covering the core principles of modern investing. Connecting theory to practice, our Global Markets research experts and academic partners covered ...

Sep 24, 2024

Machine Learning Stock Selection Model

State Street Global Markets’ Machine Learning Stock Selection Model uses a data-driven approach and machine learning techniques to predict sector-relative performance of U.S. large cap stocks. Our model: • Incorporates State Street’s proprietary indicators of media sentiment and behavioral trends • Uses our Model Fingerprint framework to offer insights into the key drivers of stock returns • Shows strong efficacy in predicting sector-relative stocks returns in an out-of-sample ...

Sep 19, 2024

Navigating the Green Tightrope

By Alexander Cheema-Fox, Megan Czasonis, Piyush Kontu, and George Serafeim We investigate reliance on carbon offsets for decarbonization, associated risks and factors that explain variation in offset prices. Relying on carbon offsets for decarbonization has become an increasingly contentious approach in the fight against climate change. Many companies view the purchase of credits in carbon reduction or removal projects, such as reforestation or renewable energy initiatives, as an effective way ...

Sep 18, 2024

Navigating the Green Tightrope

By Alexander Cheema-Fox, Megan Czasonis, Piyush Kontu, and George Serafeim We investigate reliance on carbon offsets for decarbonization, associated risks and factors that explain variation in offset prices. Relying on carbon offsets for decarbonization has become an increasingly contentious approach in the fight against climate change. Many companies view the purchase of credits in carbon reduction or removal projects, such as reforestation or renewable energy initiatives, as an effective way ...

Sep 16, 2024

A Transparent Alternative to Neural Networks

By Megan Czasonis, Mark Kritzman and David Turkington We show that relevance-based prediction captures complex relationships, like a neural network, but with the added benefit of transparency. Many prediction tasks in economics and finance lie beyond the reach of linear regression analysis. Researchers, therefore, often turn to machine learning techniques, such as neural networks, to address these complex dynamics. A neural network has the potential to extract nearly all the useful information ...

Aug 8, 2024

State Street 2024 Summer Sessions

Join us for the 2024 State Street Summer Sessions Webinar Series Time to review the fundamentals of finance and investing! Even the most sophisticated investors can benefit from an occasional tune up. Join us for our 4th annual State Street Summer Sessions, where our team of academic and industry experts will go back to basics and cover the core principles of modern investing. Connecting theory to practice, our presenters will cover topics including inflation, liquidity, and private markets into ...

Aug 1, 2024

The Virtue of Transparency for Prediction

By Megan Czasonis, Mark Kritzman and David Turkington We show how our method of relevance-based prediction implements similar logic to a highly complex machine learning model, but relevance is extremely transparent. What is the best way to form predictions from a data sample? This is a big question, but at its core lies a fundamental tension between explaining the past and anticipating the future. Predictions can fail by paying too little attention to the past (underfitting) or by paying too ...

Aug 1, 2024

The Virtue of Transparency in Prediction

By Megan Czasonis, Mark Kritzman and David Turkington We show how our method of relevance-based prediction implements similar logic to a highly complex machine learning model, but relevance is extremely transparent. What is the best way to form predictions from a data sample? This is a big question, but at its core lies a fundamental tension between explaining the past and anticipating the future. Predictions can fail by paying too little attention to the past (underfitting) or by paying too ...

Jun 28, 2024

State Street 2024 Foundations of Investing Seminar Series

Join us for the 2024 State Street Foundations of Investing Seminar Series Time to review the fundamentals of finance and investing! Even the most sophisticated investors can benefit from an occasional tune-up. Join us for our fourth annual State Street Foundations of Investing Seminar Series, where our team of academic and industry experts will go back to basics, covering the core principles of modern investing. Connecting theory to practice, our Global Markets research experts and academic partners ...

Jun 17, 2024

State Street 2024 Summer Sessions

Join us for the 2024 State Street Summer Sessions Webinar Series Time to review the fundamentals of finance and investing! Even the most sophisticated investors can benefit from an occasional tune up. Join us for our 4th annual State Street Summer Sessions, where our team of academic and industry experts will go back to basics and cover the core principles of modern investing. Connecting theory to practice, our presenters will cover topics including inflation, liquidity, and private markets ...

Jan 11, 2024

Corporate Alignment with the EU Taxonomy for Sustainable Activities

By Alexander Cheema-Fox, Megan Czasonis, Piyush Kontu and George Serafeim We explore the world’s first set of financial accounting data on firms’ sustainable activities. Though sustainable investing has grown in popularity over the past decade, measuring sustainability remains a key challenge. Investors often rely on environmental criteria—such as analyst ratings and carbon emissions—that are insufficient or rely on qualitative analysis. However, for the first time, with the advent of the EU’s ...

Jan 10, 2024

Corporate Alignment with the EU Taxonomy for Sustainable Activities

By Alexander Cheema-Fox, Megan Czasonis, Piyush Kontu and George Serafeim We explore the world’s first set of financial accounting data on firms’ sustainable activities. Though sustainable investing has grown in popularity over the past decade, measuring sustainability remains a key challenge. Investors often rely on environmental criteria—such as analyst ratings and carbon emissions—that are insufficient or rely on qualitative analysis. However, for the first time, with the advent of the EU’s ...

Jan 9, 2024

Full-Scale Currency Hedging

By Megan Czasonis, Mark Kritzman, and David Turkington. We propose a new currency hedging technique called full-scale hedging, which accounts for the complexities of diversification. Diversification is nuanced and summary statistics, such as correlation, fail to capture complexities that lie below the surface. For investors, these complexities matter—accounting for them can make the difference between an effective, or ineffective, hedging strategy. In the case of currencies, investors often ...

Jan 8, 2024

Full-Scale Currency Hedging

By Megan Czasonis, Mark Kritzman, and David Turkington. We propose a new currency hedging technique called full-scale hedging, which accounts for the complexities of diversification. Diversification is nuanced and summary statistics, such as correlation, fail to capture complexities that lie below the surface. For investors, these complexities matter—accounting for them can make the difference between an effective, or ineffective, hedging strategy. In the case of currencies, investors often ...

Dec 19, 2023

Dynamic Warp Analysis: A New Approach for Detecting and Timing Bubbles

By Mark Kritzman, Huili Song, and David Turkington. We show how warping time renders stock price bubbles comparable, revealing common patterns that investors can use to detect new bubbles and time exposure to their rise and fall. Can history offer a guide to understanding future stock-price bubbles? The answer is yes, but we have to learn how to bend time. Thankfully, a method called dynamic time warping offers the solution. Previous bubbles occur at different paces: some rise fast and others ...

Sep 6, 2023

Working paper - change to premium

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Jul 31, 2023

Co-occurrence: A New Perspective on Portfolio Diversification

By William Kinlaw, Mark Kritzman, and David Turkington Conventional statistics hide important realities that investors need to know. The correlation coefficient often fails to capture what really matters to investors. There are two reasons for this. First, investors often measure correlations using monthly data and assume that they also hold over one-year, five-year or ten-year periods. Unfortunately, in the real world, they often don’t. The second reason has to do with a fundamental misconception ...

Jun 28, 2023

State Street 2023 Foundations of Investing Seminar Series

Join us for the 2023 State Street Foundations of Investing Seminar Series Time to review the fundamentals of finance and investing! Even the most sophisticated investors can benefit from an occasional tune-up. Join us for our third annual State Street Foundations of Investing Seminar Series, where our team of academic and industry experts will go back to basics, covering the core principles of modern investing. Connecting theory to practice, our Global Markets research experts and academic partners ...

Jun 2, 2023

State Street 2023 Summer Sessions

Join us for the 2023 State Street Summer Sessions Webinar Series Time to review the fundamentals of finance and investing! Even the most sophisticated investors can benefit from an occasional tune-up. Join us for our third annual State Street Summer Sessions, where our team of academic and industry experts will go back to basics, covering the core principles of modern investing. Connecting theory to practice, our Global Markets research experts and academic partners will cover topics such as ...

Working Paper