NEWSLETTER of July 31, 2026

The following content has been added at finexpert:

Allianz Research
WHEN BONDS STOP HEDGING EQUITIES: RETHINKING PORTFOLIO DIVERSIFICATION
The 60/40 portfolio has quietly stopped working. The risk-adjusted return investors could reasonably expect from the standard balanced portfolio has fallen to roughly a third of its long-run level, from a Sharpe ratio of 0.47 to just 0.14, as bonds and equities have stopped hedging each other for the first time in a generation. >more

Allianz
FINANCIAL LITERACY PAYS: SMARTER INVESTING GOES BEYOND AI
From children’s investment accounts in the US, to pension reforms in Germany, responsibility for building wealth and financing retirement is increasingly shifting from institutions to individuals. While this gives households greater opportunities to shape their financial future, it also makes understanding basic financial concepts, such as compound interest, inflation, risk and diversification, more important than ever. The latest Financial Literacy Report by Allianz Research suggests that the road ahead will be a long one as financial capability is not yet keeping pace. >more

Deutsche Bank Research
DEUTSCHLANDS NEUER GRÜNDERBOOM
After years of stagnation, the German economy is showing remarkable momentum in one area: business start-ups. The number of new businesses and start-ups is rising at a rate not seen for a long time. >more

Institut der deutschen Wirtschaft
DEUTSCHLAND.IMMOBILIEN: VERMIETERREPORT 2026
The private rental market in Germany continues to be dominated by small, long-term landlords – as shown by the Deutschland.Immobilien Landlord Report 2026, which is based on data from 1,002 private landlords surveyed in February 2026. >more

IS HOME BIAS BIASED? NEW EVIDENCE FROM THE INVESTMENT FUND SECTOR
Claudia Lambert, Luis Molestina Vivar, and Michael Wedow
2026
Investment funds hold a disproportionately larger fraction of domestic relative to foreign stocks. Stock market development and familiarity (language and distance) are considered key determinants for home bias. The literature neglects however that investors often invest in foreign funds domiciled in financial centers. We use a “look-through approach” to account for this misclassification. First, we find substantially smaller home bias estimates compared to those in the literature. Second, the explanatory power of plausible home bias determinants is lower than previously documented. Third, familiarity only plays a meaningful role when investors are households, highlighting the role of investor sophistication. >more

CAN CHATGPT FORECAST STOCK PRICE MOVEMENTS? RETURN PREDICTABILITY AND LARGE LANGUAGE MODELS
Alejandro Lopez-Lira, and Yuehua Tang
2026
We document the capability of large language models (LLMs) like ChatGPT to predict stock market reactions from news headlines without direct financial training. Using post-knowledge-cutoff headlines, GPT-4 captures initial market responses, achieving approximately 90% portfolio-day hit rates for the non-tradable initial reaction. GPT-4 scores also significantly predict the subsequent drift, especially for small stocks and negative news. Forecasting ability generally increases with model size, suggesting that financial reasoning is an emerging capacity of complex LLMs. Strategy returns decline as LLM adoption rises, consistent with improved price efficiency. To rationalize these findings, we develop a theoretical model that incorporates LLM technology, information-processing capacity constraints, underreaction, and limits to arbitrage.  >more