Riskology: Did markets overreact to China sell-offs?

Analysis of recent volatility shows the limitations of single-factor models, write Katherine Macleod of Senator Investment Group and Damian Handzy of Investor Analytics

As international markets gyrated over the past several months it seemed to us that participants possibly adopted a “hair-trigger” or reactionary approach and thereby exaggerated both the impact and contagion of what would otherwise have been localised market events. Specifically, we wanted to examine if markets overreact to single-factor events by evaluating if stocks are oversold relative to single-factor exposure. China’s dramatic and unprecedented June and August sell-offs are good candidates