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Pairs trading is a market-neutral strategy that exploits historical correlation between stocks to achieve statistical arbitrage. Existing pairs-trading algorithms in the literature require rather restrictive assumptions on the underlying…
Many studies assume stock prices follow a random process known as geometric Brownian motion. Although approximately correct, this model fails to explain the frequent occurrence of extreme price movements, such as stock market crashes. Using…
In complex systems, many different parts interact in non-obvious ways. Traditional research focuses on a few or a single aspect of the problem so as to analyze it with the tools available. To get a better insight of phenomena that emerge…
An investment portfolio consists of $n$ algorithmic trading strategies, which generate vectors of positions in trading assets. Sign opposite trades (buy/sell) cross each other as strategies are combined in a portfolio. Then portfolio…
We present a new model for prediction markets, in which we use risk measures to model agents and introduce a market maker to describe the trading process. This specific choice on modelling tools brings us mathematical convenience. The…
This paper studies an equity market of stochastic dimension, where the number of assets fluctuates over time. In such a market, we develop the fundamental theorem of asset pricing, which provides the equivalence of the following statements:…
Stock market movements are influenced by public and private information shared through news articles, company reports, and social media discussions. Analyzing these vast sources of data can give market participants an edge to make profit.…
We investigate how and when to diversify capital over assets, i.e., the portfolio selection problem, from a signal processing perspective. To this end, we first construct portfolios that achieve the optimal expected growth in i.i.d.…
We study the temporal evolution of the market efficiency in the stock markets using the complexity, entropy density, standard deviation, autocorrelation function, and probability distribution of the log return for Standard and Poor's 500…
In this paper, we address one of the main puzzles in finance observed in the stock market by proponents of behavioral finance: the stock predictability puzzle. We offer a statistical model within the context of rational finance which can be…
We consider a continuous-time game-theoretic model of an investment market with short-lived assets and endogenous asset prices. The first goal of the paper is to formulate a stochastic equation which determines wealth processes of investors…
We derive normal approximation results for a class of stabilizing functionals of binomial or Poisson point process, that are not necessarily expressible as sums of certain score functions. Our approach is based on a flexible notion of the…
This paper introduces an agent-based artificial financial market in which heterogeneous agents trade one single asset through a realistic trading mechanism for price formation. Agents are initially endowed with a finite amount of cash and a…
The p-adic theory of the stock market is presented. It is shown that the price dynamics is very naturally described by the adelic function. The procedure of derivation of the functional integral formulation of adelic type is derived from…
Artificial stock market simulation based on agent is an important means to study financial market. Based on the assumption that the investors are composed of a main fund, small trend and contrarian investors characterized by four…
In this paper we seek to demonstrate the predictability of stock market returns and explain the nature of this return predictability. To this end, we introduce investors with different investment horizons into the news-driven, analytic,…
In this report, we talked about a new quantitative strategy for choosing the optimal(s) stock(s) to trade. The basic notions are generally very known by the financial community. The key here is to understand 1) the standard score applied to…
In this paper, we consider the problem of optimization of a portfolio consisting of securities. An investor with an initial capital, is interested in constructing a portfolio of securities. If the prices of securities change, the investor…
Associating stock mechanics to real economy, in terms of volume, number of transactions, and cost, i.e. money flow for shares, we obtained the fundamental laws of stock mechanics.
In this paper we propose a new stochastic model based on a generalization of semi-Markov chains to study the high frequency price dynamics of traded stocks. We assume that the financial returns are described by a weighted indexed…