We analyze the behavior of all financial and non-financial firms active in the UK FX derivatives market—the largest global center for currency trading—using transaction- level data. Based on firm-level net currency derivatives exposures, we find that UK and EU pension funds, investment funds, insurers and non-financial corporations use FX derivatives primarily for hedging purposes, with dealer banks accommodating these clients’ hedging needs. In contrast, hedge funds predominantly utilize FX derivatives to speculate, with their trading activity consistent with carry trade, momentum, and macroeconomic news investment strategies. Lastly, the paper documents many novel facts that should motivate theoretical models.

We introduce a novel empirical decomposition of equity price growth rates in terms of equity holdings, based on market-clearing conditions. Although our sample holdings cover only an average of 5% of market capitalization, our reconstructed equity holdings account for, on average, 89% of the time variation in over 20,000 individual stock prices and 96% of the fluctuations in 33 aggregate stock markets. Using this decomposition, we introduce new stylized facts to inform asset pricing models. We find that changes in portfolio weights explain most of the variation of individual stock prices, while aggregate wealth effects are more important for the overall stock market fluctuations. Equity markets are global and exchange rates play a key equilibrating role. They dampen local stock market volatility for all stock markets, except those associated with the three safe-haven currencies—USD, JPY, and CHF—and currencies pegged to the USD.

We build novel indexes of commodity price developments by simulating news-reading. Our proposed computer-based, narrative approach is flexible, unified and spans the global commodity market, including energy, industrial and precious metals, and agricultural commodities. Empirical evidence and human readings of news articles indicate that our indexes capture commodity-price supply and demand components. Index-peaks track the post-crisis collapse of commodity markets, other market-specific developments, as well as the recent COVID-19 crisis. The richness of news content allows us to decompose the supply and demand indexes into a number of key determinants that shaped commodity markets since the beginning of the 21st century, including business cycle effects, geopolitical risk, natural disasters, and climate change considerations. Results reveal that the nature of commodity price movements matters for macroeconomic outcomes, firms' decisions, and asset prices.