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This paper investigates the impact of posterior drift on out-of-sample forecasting accuracy in overparametrized machine learning models. We document the loss in performance when the loadings of the data generating process change between the…
The volatility characterizes the amplitude of price return fluctuations. It is a central magnitude in finance closely related to the risk of holding a certain asset. Despite its popularity on trading floors, the volatility is unobservable…
Most empirical microstructure research assumes that order flow--return parameters are constant, yet these relationships shift substantially across market regimes. Combining adaptive Kalman filtering, Markov-switching regime identification,…
Despite the tremendous advancements in the field of network theory, very few studies have taken weights in the interactions into consideration that emerge naturally in all real world systems. Using random matrix analysis of a weighted…
Cross-sectional signatures of market panic were recently discussed on daily time scales in [1], extended here to a study of cross-sectional properties of stocks on intra-day time scales. We confirm specific intra-day patterns of dispersion…
We find economically and statistically significant gains when using machine learning for portfolio allocation between the market index and risk-free asset. Optimal portfolio rules for time-varying expected returns and volatility are…
The aim of this paper is to identify the determinants of international stock markets integration. Intuitively we selected a great number of factors linked to financial integration. Then, we developed an international asset-pricing model…
Understanding the mutual relationships between information flows and social activity in society today is one of the cornerstones of the social sciences. In financial economics, the key issue in this regard is understanding and quantifying…
Learning the influence graph G of a high-dimensional Markov process is central to many application domains, including social networks, neuroscience, and financial risk analysis. However, in many of these applications, future states of the…
This paper proposes a quantitative model of the circulation of foreign news based on a gravity-like model of spatial interaction disaggregated by time, media and countries of interest. The analysis of international RSS news stories…
Changes in air transport networks over time may be induced by competition among carriers, changes in regulations on airline industry, and socioeconomic events such as terrorist attacks and epidemic outbreaks. Such network changes may…
This thesis applies entropy as a model independent measure to address three research questions concerning financial time series. In the first study we apply transfer entropy to drawdowns and drawups in foreign exchange rates, to study their…
The measured correlations of financial time series in subsequent epochs change considerably as a function of time. When studying the whole correlation matrices, quasi-stationary patterns, referred to as market states, are seen by applying…
Stock prices are influenced over time by underlying macroeconomic factors. Jumping out of the box of conventional assumptions about the unpredictability of the market noise, we modeled the changes of stock prices over time through the…
Empirical data of supermarket sales show stylised facts that are similar to stock markets, with a broad (truncated) Levy distribution of weekly sales differences in the baseline sales [R.D. Groot, Physica A 353 (2005) 501]. To investigate…
We develop a new stock market index that captures the chaos existing in the market by measuring the mutual changes of asset prices. This new index relies on a tensor-based embedding of the stock market information, which in turn frees it…
Scale independence is a ubiquitous feature of complex systems which implies a highly skewed distribution of resources with no characteristic scale. Research has long focused on why systems as varied as protein networks, evolution and stock…
This paper distinguishes between risk resonance and risk diversification relationships in the cryptocurrency market based on the newly developed asymmetric breakpoint approach, and analyzes the risk propagation mechanism among…
The crowd panic and its contagion play non-negligible roles at the time of the stock crash, especially for China where inexperienced investors dominate the market. However, existing models rarely consider investors in networking stocks and…
Fluctuations in stock prices are influenced by a complex interplay of factors that go beyond mere historical data. These factors, themselves influenced by external forces, encompass inter-stock dynamics, broader economic factors, various…