Related papers: Optimizing a basket against the efficient market h…
Markets have internal dynamics leading to excess volatility and other phenomena that are difficult to explain using rational expectations models. This paper studies these using a nonequilibrium price formation rule, developed in the context…
We discuss the theoretical machinery involved in predicting financial market movements using an artificial market model which has been trained on real financial data. This approach to market prediction - in particular, forecasting financial…
Markets efficiency implies that the stock returns are intrinsically unpredictable, a property that makes markets comparable to random number generators. We present a novel methodology to investigate ultra-high frequency financial data and…
Inefficient markets allow investors to consistently outperform the market. To demonstrate that inefficiencies exist in sports betting markets, we created a betting algorithm that generates above market returns for the NFL, NBA, NCAAF,…
In a fixed time horizon, appropriately executing a large amount of a particular asset -- meaning a considerable portion of the volume traded within this frame -- is challenging. Especially for illiquid or even highly liquid but also highly…
We give examples of situations -- stochastic production, military tactics, corporate merger -- where it is beneficial to concentrate risk rather than to diversify it, that is, to put all eggs in one basket. Our examples admit a dual…
The state price density of a basket, even under uncorrelated Black-Scholes dynamics, does not allow for a closed from density. (This may be rephrased as statement on the sum of lognormals and is especially annoying for such are used most…
A novel algorithm for actively trading stocks is presented. While traditional expert advice and "universal" algorithms (as well as standard technical trading heuristics) attempt to predict winners or trends, our approach relies on…
This study investigates the application of causal discovery algorithms in equity markets, with a focus on their potential to build investment strategies. An investment strategy was developed based on the causal structures identified by…
Most finance studies are discussed on the basis of several hypotheses, for example, investors rationally optimize their investment strategies. However, the hypotheses themselves are sometimes criticized. Market impacts, where trades of…
We consider in detail an investment strategy, titled "The Bounce Basket", designed for someone to express a bullish view on the market by allowing them to take long positions on securities that would benefit the most from a rally in the…
Detailed study of the financial empirical correlation matrix of the 30 companies comprised by DAX within the period of the last 11 years, using the time-window of 30 trading days, is presented. This allows to clearly identify a nontrivial…
We propose to study market efficiency from a computational viewpoint. Borrowing from theoretical computer science, we define a market to be \emph{efficient with respect to resources $S$} (e.g., time, memory) if no strategy using resources…
We devise an optimal allocation strategy for the execution of a predefined number of stocks in a given time frame using the technique of discrete-time Stochastic Control Theory for a defined market model. This market structure allows an…
There seems to be an upper limit to predicting the outcome of matches in (semi-)professional sports. Recent work has proposed that this is due to chance and attempts have been made to simulate the distribution of win percentages to identify…
In this brief review, we critically examine the recent work done on correlation-based networks in financial systems. The structure of empirical correlation matrices constructed from the financial market data changes as the individual stock…
It has become the default in markets such as ad auctions for participants to bid in an auction through automated bidding agents (autobidders) which adjust bids over time to satisfy return-over-spend constraints. Despite the prominence of…
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,…
This book chapter reviews some of the major principles associated with optimal strategy in basketball. In particular, we consider the principles of allocative efficiency (optimal allocation of shots between offensive options), dynamic…
We introduce a mathematical theory called market connectivity that gives concrete ways to both measure the efficiency of markets and find inefficiencies in large markets. The theory leads to new methods for testing the famous efficient…