Robert Shiller would... By some strange machinations of chance, I met Shiller a few days ago and figured I might as well ask him about the contents of this post. First, I have to say that he was absolutely gracious and quite generous with his time. He was humble and engaging and I walked away from the experience feeling kindled.
I told him about this thread and asked him if he had written anything further on the subject of GDP derivatives because I had been unable to find anything. I told him I suggested cross hedging, and he asked me how I would do that, and I told him pretty much exactly what I posted. Then he asked me what I would use that most correlated with the GDP, and unfortunately I don't know of any one thing that does well. He then pointed out a somewhat analogous situation that exists with the housing market.
Many of you may be familiar with the Case Shiller index for home prices. It's a composite index based on 20 metropolitan areas and Shiller's company, MacroMarkets, recently began to offer an exchange-traded fund based on this index. It's an innovative idea, to say the least.
http://www.smartmoney.com/Investing/ETFs/Three-New-ETFs-Worth-Waiting-For/?hpadref=1
As it turns out, he's actually going to be publishing an article on GDP derivatives some time in the near future. First there will be one geared toward Canada, and then one on the U.S. after that. He said it was OK if I posted about that, and when the articles come out, I will post them as well.
