State Street to Provide GeoQuant Risk Indicators
Posted by Colin Lambert. Last updated: July 13, 2023
State Street has entered into an arrangement with GeoQuant, owned by Fitch Solutions, to make available geopolitical and country risk indicators produced and calculated by GeoQuant in State Street’s own macro strategy research.
The GeoQuant indicators measure and predict political risk daily and systematically with a fusion of PhD-level political and computer science. The full suite of GeoQuant’s indicators are available on a subscription basis exclusively from GeoQuant. The firm says it is also developing, with input from State Street, a new indicator designed to capture the links between geopolitical risk and market risk.
The indicators and commentary will be made available via State Street’s Global Markets Insights platform, which provides data-driven indicators and investment ideas derived from high-frequency inflation, media sentiment and investor flows, informed by data from State Street’s position as a servicer to $37.6 trillion in assets.
“Geopolitical events such as elections, political unrest, and economic policy decisions can have huge impacts on financial markets,” says Will Kinlaw, head of research for State Street Global Markets. “Understanding the impact of these seismic events, from scheduled election cycles to sudden geopolitical unrest or flashpoints, is crucial to informing risk management analysis, asset allocation and portfolio construction. Our clients are increasingly seeking hard data, indicators and prediction models for these kinds of events, and by collaborating with GeoQuant we are able to bring quantitative rigour to an area that has historically been more challenging for investors to decipher and forecast.”
GeoQuant’s approach starts with the accepted “ground truths” in contemporary political science that define the core drivers of political change – explicitly and systematically measuring the fundamentals of political risk. It then uses computer science to integrate those fundamentals into real-time assessments of governance, social and security conditions, drawn from credible data and media sources locally, regionally and globally available across several languages. The result is systematic and adaptive data, with the potential to connect the dots between politics, economics and markets.
The political risk indicators quantify 40+ political risks across 127 countries, the firm says, adding the data is updated hourly by AI-machine learning algorithms and vetted daily by a global team of PhD-level political scientists and experts. The indicators are designed to predict political risk both within and across countries, and can be integrated directly into economic and risk models.