MIEF At Work

Since I graduated more than a year ago, the global capital markets were defined by risk-on and risk-off around a few events- the RMB’s unpredicted depreciation, the Fed’s first hike in a decade and Brexit. What the market did not know would happen happened, what the market knew would happen happened, and what the market knew would not happen happened. But there is one thing in common- predicting and reacting to each of them has proven difficult for me. For example, I am still unable to see why the BOJ’s negative interest policy backfired, while the same policy worked for the ECB. In each case what I learned at SAIS has enhanced my ability, and improved my odds in dealing with the complexities and uncertainties of these events.

Theoretical framework

I used to be easily persuaded by news and sell-side research, whose arguments are usually made without evaluating the opposite relevant aspects. Having no prior framework to check against, I was naturally confused and not confident. SAIS changed this. Here, I learned that the federal funds rate does not simply follow what the Taylor rule suggests. A low interest rate environment in other developed markets must put a cap through the exchange rate channel. Facing the increase in global interest rate, monetary tools in emerging markets are not limited to just raising the interest rate. These theoretical frameworks improved the quality of my analysis.

Quantitative tools and presentation skills

The most interesting part of my work involves collecting data, running analyses and communicating the findings. Everyone can run regressions on excel, but many also run into difficulties when it comes to time-series analysis. GARCH and cointegration are things I learned in class but did not really know how to apply in real life. That is, until they came back to me in forecasting volatilities and constructing pair trading strategies. Living on the macro side of the market, the most valuable skills I learned in private equity is how to write recommendations and deliver presentations that are powerful, something I am still trying to follow every day.

Appreciate economic issues in a broader context.

Having not taken any IR course makes me less credible in this topic. I did however, immerse myself in SAIS and its neighborhood, I learned that many economic policies are rooted in politics and international relations. Just before I graduated, I predicted against Grexit solely based on economic reasoning. While the outcome happened to be so, the referendum process revealed a much more complex picture at the grassroots, and a real possibility for the opposite result. One year later, as many pundits and market players underplayed the possibility of Brexit even as the polls started to turn in favor of the opposite, I stayed cautious, remembering the lesson that politics and international relations are much harder to predict than economics.


I spent this Independence Day at West Point, watching a great army band performance and beautiful fireworks taking off the Hudson river. On the wall of one of the academy’s six churches, I found the following cadets’ prayer. “Make us choose the harder right instead of the easier wrong, and never to be content with a half-truth when the whole can be won.” It reminded me of Professor Marquez’s question, “how do I know,” his early mornings and “the path less traveled.” In the market or in life, truth always needs to be won by the few with courage and perseverance. As grateful I as I am for the many things SAIS taught me, I pray that one day these qualities, which are nurtured in this intellectually free and physically intense program, will lead me to my truth.

-Zhao Peng (MIEF '15)