One way market participants can improve their inflation forecasts is to analyze it from many perspectives, just as a data scientist would. In a recent Street View, our colleagues on the Two Sigma Portfolio Management team use that approach to analyze both historical and forward-looking U.S. inflation forecasts. 

The Two Sigma Factor Lens TM  includes a Local Inflation factor, which is intended to help subscribers understand their exposure to the long-term inflation risk premium and short-term inflation surprises within the local currency area.1 You can read more about Venn’s Local Inflation factor in our three part Inflation Series:

  1. Local Inflation Factor Primer: In this blog post, we cover how the factor is constructed, what it means to have exposure to the factor as we’ve built it, and a summary of the factor’s historical performance.
  2. Factor InVe(nn)stigator: Inflation: We analyze several inflation-sensitive assets and their exposure to the Local Inflation factor and other factors.
  3. Managing Inflation Risk in the Current Environment: We discuss current inflation expectations and how investors can incorporate their inflation views into their portfolio construction and asset allocation decisions.

Read the full article entitled “Forecasting Inflation like a Data Scientist: 2021 Edition” here.

Read more of their research here, and subscribe to directly receive the latest research from Two Sigma, for the topics you choose, in your inbox.


Get in Touch


1 The Local Inflation factor is available in the USD and GBP versions of the factor lens only, where there are liquid markets for inflation-linked securities.


This article is not an endorsement by Two Sigma Investor Solutions, LP or any of its affiliates (collectively, “Two Sigma”) of the topics discussed. The views expressed above reflect those of the authors and are not necessarily the views of Two Sigma. This article (i) is only for informational and educational purposes, (ii) is not intended to provide, and should not be relied upon, for investment, accounting, legal or tax advice, and (iii) is not a recommendation as to any portfolio, allocation, strategy or investment. This article is not an offer to sell or the solicitation of an offer to buy any securities or other instruments. This article is current as of the date of issuance (or any earlier date as referenced herein) and is subject to change without notice. The analytics or other services available on Venn change frequently and the content of this article should be expected to become outdated and less accurate over time. Any statements regarding planned or future development efforts for our existing or new products or services are not intended to be a promise or guarantee of future availability of products, services, or features.  Such statements merely reflect our current plans.  They are not intended to indicate when or how particular features will be offered or at what price.  These planned or future development efforts may change without notice. Two Sigma has no obligation to update the article nor does Two Sigma make any express or implied warranties or representations as to its completeness or accuracy. This material uses some trademarks owned by entities other than Two Sigma purely for identification and comment as fair nominative use. That use does not imply any association with or endorsement of the other company by Two Sigma, or vice versa. See the end of the document for other important disclaimers and disclosures. Click here for other important disclaimers and disclosures.

This article may include discussion of investing in virtual currencies. You should be aware that virtual currencies can have unique characteristics from other securities, securities transactions and financial transactions. Virtual currencies prices may be volatile, they may be difficult to price and their liquidity may be dispersed. Virtual currencies may be subject to certain cybersecurity and technology risks. Various intermediaries in the virtual currency markets may be unregulated, and the general regulatory landscape for virtual currencies is uncertain. The identity of virtual currency market participants may be opaque, which may increase the risk of market manipulation and fraud. Fees involved in trading virtual currencies may vary.


Recent Posts