15 seconds to alpha: CMBX risk pricing with limited information

In this paper we introduce and validate a method for daily and intraday estimation of reduced form risk decompositions for CMBX before and during the Covid pandemic. We estimate default, rates, liquidity, and excess liquidity risk partitions from monthly primitives found in Christopoulos (2017) and Christopoulos and Jarrow (2018). Within the Covid pandemic, we perform CMBX risk partition estimations in intervals of 15 seconds intraday for 240 trading days and disclose regular patterns of risk partition volatility in the cross section. We fuse these insights into CMBX risk to the related REIT market in 54 automated long/short day trading strategies. Using the ICAPM of Merton (1990), we find 96% of our strategies exhibited statistically significant alphas, with 65% of them producing abnormal positive returns between 0.73% and 48.74%. Our findings support the assessment of CMBX and REIT liquidity with our estimates of reduced form CMBX risk partitions.