Related papers: Temporal Evolution of Financial Market Correlation…
In recent years, multi-factor strategies have gained increasing popularity in the financial industry, as they allow investors to have a better understanding of the risk drivers underlying their portfolios. Moreover, such strategies promise…
Extremal dependence between international stock markets is of particular interest in today's global financial landscape. However, previous studies have shown this dependence is not necessarily stationary over time. We concern ourselves with…
The vast majority of market impact studies assess each product individually, and the interactions between the different order flows are disregarded. This strong approximation may lead to an underestimation of trading costs and possible…
The use of factor stochastic volatility models requires choosing the number of latent factors used to describe the dynamics of the financial returns process; however, empirical evidence suggests that the number and makeup of pertinent…
This paper assesses the link between central bank's policy rate, inflation rate and output gap through Taylor rule equation in both United States and United Kingdom from 1990 to 2020. Also, it analyses the relationship between monetary…
In this paper we present a continuous time dynamical model of heterogeneous agents interacting in a financial market where transactions are cleared by a market maker. The market is composed of fundamentalist, trend following and contrarian…
By scientific standards, the accuracy of short-term economic forecasts has been poor, and shows no sign of improving over time. We form a delay matrix of time-series data on the overall rate of growth of the economy, with lags spanning the…
This letter explores the behavior of conditional correlations among main cryptocurrencies, stock and bond indices, and gold, using a generalized DCC class model. From a portfolio management point of view, asset correlation is a key metric…
Although the CML (Capital Market Line), the Intertemporal-CAPM, the CAPM/SML (Security Market Line) and the Intertemporal Arbitrage Pricing Theory (IAPT) are widely used in portfolio management, valuation and capital markets financing;…
We use methods of random matrix theory to analyze the cross-correlation matrix C of price changes of the largest 1000 US stocks for the 2-year period 1994-95. We find that the statistics of most of the eigenvalues in the spectrum of C agree…
Asset correlations are an intuitive and therefore popular way to incorporate event dependence into event risk, e.g., default risk, modeling. In this paper we study the case of estimation of inter-sector asset correlations by separation of…
According to the leading models in modern finance, the presence of intraday lead-lag relationships between financial assets is negligible in efficient markets. With the advance of technology, however, markets have become more sophisticated.…
We discuss price variations distributions in foreign exchange markets, characterizing them both in calendar and business time frameworks. The price dynamics is found to be the result of two distinct processes, a multi-variance diffusion and…
We present a dynamical theory of asset price bubbles that exhibits the appearance of bubbles and their subsequent crashes. We show that when speculative trends dominate over fundamental beliefs, bubbles form, leading to the growth of asset…
This paper studies the links between the descriptions of macroeconomic variables and statistical moments of market trade, price, and return. The randomness of market trade values and volumes during the averaging interval {\Delta} results in…
Random matrix theory allows one to deduce the eigenvalue spectrum of a large matrix given only statistical information about its elements. Such results provide insight into what factors contribute to the stability of complex dynamical…
We conduct an empirical study using the quantile-based correlation function to uncover the temporal dependencies in financial time series. The study uses intraday data for the S\&P 500 stocks from the New York Stock Exchange. After…
The objective of this work is the investigation of complexity, asymmetry, stochasticity and non-linearity of the financial and economic systems by using the tools of statistical mechanics and information theory. More precisely, this thesis…
We exploit a continuous time random walk description of stock prices to obtain a fast and accurate evaluation of their volatility from intraday data. We show that financial markets are usefully described as open physical systems. Indeed we…
We study a generic model for self-referential behaviour in financial markets, where agents attempt to use some (possibly fictitious) causal correlations between a certain quantitative information and the price itself. This correlation is…