Omnipresent across world markets these days is the specter or influence of inflation. An equally common challenge, however is the ability for investors to access inflation data in a timely and accurate way. Individual country or regional measures vary greatly by methodology and frequency resulting in a key piece of the economic jigsaw puzzle being largely inaccessible for institutional investors to build their investment strategies around.
Responding to this challenge and reflecting State Street’s commitment to engaging the world of academia to develop innovative solutions for institutional investors, State Street Global Markets and PriceStats, a provider of high-frequency global inflation indices that offers insights into key macroeconomic variables, announced on May 5th the formation of a partnership that will provide unique inflation indices and research that will be incorporated into advisory research analyses and investment strategy publications across major asset classes and distributed through State Street Global Markets' proprietary client research portal IR3.
Founded by two MIT professors, Alberto Cavallo and Robert Rigobon, the PriceStats initiative provides high frequency global inflation indices across the full spectrum of consumer goods. The indices provide the clearest available insights into global inflation trends on a daily basis. The partnership will benefit from its relationship with State Street Global Markets' academic affiliate, State Street Associates (SSA). SSA has 13 years of experience in bringing leading academic research in finance and economics to sophisticated institutional investors around the world.
About the Indices
The PriceStats indices offer a highly detailed daily measure of inflation. The indices differ from others in three ways. First, they cover a full universe of prices including both sale and full price items. Second, they are timely with data delivered at a higher frequency than other existing inflation indices, and third, and perhaps most importantly, the indices are backed by proprietary algorithms that we have developed to analyze and weight these products and prices. These algorithms create a detailed, meaningful, daily measure of inflation that is different from the other measures that are currently available.
The PriceStats indices are designed to provide daily information on major inflation trends, not to forecast official inflation announcements in the short run. These indices can also capture a different mix of consumers, retailers, and products than official measures of inflation. They are also released with a much higher frequency and with a shorter lag. Nonetheless, with some adjustments, State Street Global Markets can use these indices to provide reasonable monthly forecasts of the official announcements in many countries. These forecasts, called “PriceStats Projections of Official Announcements” will be made available to clients exclusively through our monthly “Inflation in Focus” strategy product and our quarterly “The World through Inflation” newsletter.
