Statistical Finance
We employ a wavelet approach and conduct a time-frequency analysis of dynamic correlations between pairs of key traded assets (gold, oil, and stocks) covering the period from 1987 to 2012. The analysis is performed on both intra-day and…
Scale invariance, collective behaviours and structural reorganization are crucial for portfolio management (portfolio composition, hedging, alternative definition of risk, etc.). This lack of any characteristic scale and such elaborated…
Econophysics and econometrics agree that there is a correlation between volume and volatility in a time series. Using empirical data and their distributions, we further investigate this correlation and discover new ways that volatility and…
We check the claims that data from Google Trends contain enough data to predict future financial index returns. We first discuss the many subtle (and less subtle) biases that may affect the backtest of a trading strategy, particularly when…
This article proposes a new method for the estimation of the parameters of a simple linear regression model which accounts for the role of co-moments in non-Gaussian distributions being based on the minimization of a quartic loss function.…
Order cancellation process plays a crucial role in the dynamics of price formation in order-driven stock markets and is important in the construction and validation of computational finance models. Based on the order flow data of 18 liquid…
We test a historical price time series in a financial market (the NASDAQ 100 index) for a statistical property known as detailed balance. The presence of detailed balance would imply that the market can be modeled by a stochastic process…
In this article we discuss the distribution of asset price movements by the market potential function. From the principle of free energy minimization we analyze two different kinds of market potentials. We obtain a U-shaped potential when…
We analyze complexity of financial (and general economic) processes by comparing classical and quantum-like models for randomness. Our analysis implies that it might be that a quantum-like probabilistic description is more natural for…
We introduce a model of super-exponential financial bubbles with two assets (risky and risk-free), in which rational investors and noise traders co-exist. Rational investors form expectations on the return and risk of a risky asset and…
An expanding literature articulates the view that Taylor rules are helpful in predicting exchange rates. In a changing world however, Taylor rule parameters may be subject to structural instabilities, for example during the Global Financial…
We present and discuss a stochastic model of financial assets dynamics based on the idea of an inverse renormalization group strategy. With this strategy we construct the multivariate distributions of elementary returns based on the scaling…
We fill a void in merging empirical and phenomenological characterisation of the dynamical phase transitions in complex systems by identifying three of them on real-life financial markets. We extract and interpret the empirical, numerical,…
The principal aim of this work is the evidence on empirical way that catastrophic bifurcation breakdowns or transitions, proceeded by flickering phenomenon, are present on notoriously significant and unpredictable financial markets.…
It seems to be very unlikely that all relevant information in the stock market could be fully encoded in a geometrical shape. Still,the present paper will reveal the geometry behind the stock market transactions. The prices of market index…
Fast, global, and sensitively reacting to political, economic and social events of any kind, these are attributes that social media like Twitter share with foreign exchange markets. The leading assumption of this paper is that information…
Fractal analysis is carried out on the stock market indices of seven European countries and the US. We find evidence of long range dependence in the log return series of the Mibtel (Italy) and the PX Glob (Czech Republic). Long range…
The presence of significant cross-correlations between the synchronous time evolution of a pair of equity returns is a well-known empirical fact. The Pearson correlation is commonly used to indicate the level of similarity in the price…
We test for departures from normal and independent and identically distributed (NIID) returns, when returns under the alternative hypothesis are self-affine. Self-affine returns are either fractionally integrated and long-range dependent,…
The term structure of credit spreads is studied with an aim to predict its future movements. A completely new approach to tackle this problem is presented, which utilizes nonlinear parametric models. The Brain-Cousens regression model with…