Related papers: Performance v. Turnover: A Story by 4,000 Alphas
We propose a methodology to construct tests for the null hypothesis that the pricing errors of a panel of asset returns are jointly equal to zero in a linear factor asset pricing model -- that is, the null of "zero alpha". We consider, as a…
The Total Portfolio Approach and Strategic Asset Allocation are widely viewed as competing frameworks for institutional portfolio management. We argue they differ in a single governance parameter: the tracking error constraint. Using U.S.…
This paper conducts an empirically study on the trade package composed of a sequence of consecutive purchases or sales of 23 stocks in Chinese stock market. We investigate the probability distributions of the execution time, the number of…
In this paper we propose a new model for volatility fluctuations in financial time series. This model relies on a non-stationary gaussian process that exhibits aging behavior. It turns out that its properties, over any finite time interval,…
The Capital Asset Pricing Model (CAPM) relates a well-diversified stock portfolio to a benchmark portfolio. We insert size effect in CAPM, capturing the observation that small stocks have higher risk and return than large stocks, on…
We analyze historic S&P500 multi-day returns: from daily returns to those accumulated over up to ten days. Despite symmetry breaking between gains and losses in the distribution of returns, resulting in its positive mean and negative skew,…
Publicly traded companies are fundamental units of contemporary economies and markets and are important mechanisms through which humans interact with their environments. Understanding the general properties that underlie the processes of…
In setting up a stochastic description of the time evolution of a financial index, the challenge consists in devising a model compatible with all stylized facts emerging from the analysis of financial time series and providing a reliable…
We study the price dynamics of 65 stocks from the Dow Jones Composite Average from 1973 until 2014. We show that it is possible to define a Daily Market Volatility $\sigma(t)$ which is directly observable from data. This quantity is usually…
We investigate the average frequency of positive slope $\nu_{\alpha}^{+}$, crossing for the returns of market prices. The method is based on stochastic processes which no scaling feature is explicitly required. Using this method we define…
We present a simple model that uses time series momentum in order to construct strategies that systematically outperform their benchmark. The simplicity of our model is elegant: We only require a benchmark time series and several related…
This paper describes the dependence of market-based statistical moments of returns on statistical moments and correlations of the current and past trade values. We use Markowitz's definition of value weighted return of a portfolio as the…
The level crossing and inverse statistics analysis of DAX and oil price time series are given. We determine the average frequency of positive-slope crossings, $\nu_{\alpha}^+$, where $T_{\alpha} =1/\nu_{\alpha}^+ $ is the average waiting…
In this paper we consider the problem of minimising drawdown in a portfolio of financial assets. Here drawdown represents the relative opportunity cost of the single best missed trading opportunity over a specified time period. We formulate…
Designing dynamic portfolio insurance strategies under market conditions switching between two or more regimes is a challenging task in financial economics. Recently, a promising approach employing the value-at-risk (VaR) measure to assign…
In this paper, a statistical analysis of high frequency fluctuations of the IPC, the Mexican Stock Market Index, is presented. A sample of tick-to-tick data covering the period from January 1999 to December 2002 was analyzed, as well as…
We propose a fast and flexible method to scale multivariate return volatility predictions up to high-dimensions using a dynamic risk factor model. Our approach increases parsimony via time-varying sparsity on factor loadings and is able to…
The aim of this paper is to compare statistical properties of stock price indices in periods of booms with those in periods of stagnations. We use the daily data of the four stock price indices in the major stock markets in the world: (i)…
The correlation matrix is the key element in optimal portfolio allocation and risk management. In particular, the eigenvectors of the correlation matrix corresponding to large eigenvalues can be used to identify the market mode, sectors and…
In this study, we investigate the statistical properties of the returns and the trading volume. We show a typical example of power-law distributions of the return and of the trading volume. Next, we propose an interacting agent model of…