Related papers: Value matters: Predictability of Stock Index Retur…
The construction of an efficient portfolio with a good level of return and minimal risk depends on selecting the optimal combination of stocks. This paper introduces a novel decision-making framework for stock selection based on fractional…
We define and study a rather complex market model, inspired from the Santa Fe artificial market and the Minority Game. Agents have different strategies among which they can choose, according to their relative profitability, with the…
A portfolio of different stocks and a risk-less security whose composition is dynamically maintained stable by trading shares at any time step leads to a growth of the capital with a nonrandom rate. This is the key for the theory of…
Applying a network analysis to stock return correlations, we study the dynamical properties of the network and how they correlate with the market return, finding meaningful variables that partially capture the complex dynamical processes of…
This paper systematically conducts an analysis of the composite index 1-min datasets over the 17-year period (2005-2021) for both the Shanghai and Shenzhen stock exchanges. To reveal the difference between the Chinese and the mature stock…
Our article considers a regression model with observed factors. The observed factors have a flexible stochastic volatility structure that has separate dynamics for the volatilities and the correlation matrix. The correlation matrix of the…
This paper defines systematic value investing as an empirical optimization problem. Predictive modeling is introduced as a systematic value investing methodology with dynamic and optimization features. A predictive modeling process is…
We present a simple microstructure model of financial returns that combines (i) the well-known ARFIMA process applied to tick-by-tick returns, (ii) the bid-ask bounce effect, (iii) the fat tail structure of the distribution of returns and…
We review a resent {\em time-dependent} performance measure for economical time series -- the (optimal) investment horizon approach. For stock indices, the approach shows a pronounced gain-loss asymmetry that is {\em not} observed for the…
Several novel statistical methods have been developed to estimate large integrated volatility matrices based on high-frequency financial data. To investigate their asymptotic behaviors, they require a sub-Gaussian or finite high-order…
Factor modeling of asset returns has been a dominant practice in investment science since the introduction of the Capital Asset Pricing Model (CAPM) and the Arbitrage Pricing Theory (APT). The factors, which account for the systematic risk,…
We argue that an important contributing factor into market inefficiency is the lack of a robust mechanism for the stock price to rise if a company has good earnings, e.g., via buybacks/dividends. Instead, the stock price is prone to…
We propose a continuous-time stock-flow consistent model for inventory dynamics in an economy with firms, banks, and households. On the supply side, firms decide on production based on adaptive expectations for sales demand and a desired…
The aim of our work is to propose a natural framework to account for all the empirically known properties of the multivariate distribution of stock returns. We define and study a "nested factor model", where the linear factors part is…
We introduce a non linear pricing model of individual stock returns that defines a stickiness parameter of the returns. The pricing model resembles the capital asset pricing model used in finance but has a non linear component inspired from…
We study a market model in which the volatility of the stock may jump at a random time from a fixed value to another fixed value. This model was already described in the literature. We present a new approach to the problem, based on partial…
This paper studies a class of linear panel models with random coefficients. We do not restrict the joint distribution of the time-invariant unobserved heterogeneity and the covariates. We investigate identification of the average partial…
This work presents an asset pricing model that under rational expectation equilibrium perspective shows how, depending on risk aversion and noise volatility, a risky-asset has one equilibrium price that differs in term of efficiency: an…
High frequency data in finance have led to a deeper understanding on probability distributions of market prices. Several facts seem to be well stablished by empirical evidence. Specifically, probability distributions have the following…
This paper continues a series of studies devoted to analysis of the bivariate probability distribution P(x,y) of two consecutive price increments x (push) and y (response) at intraday timescales for a group of stocks. Besides the asymmetry…