Related papers: Performance v. Turnover: A Story by 4,000 Alphas
We perform a large-scale simulation of an Ising-based financial market model that includes 300 asset time series. The financial system simulated by the model shows a fat-tailed return distribution and volatility clustering and exhibits…
The use of improved covariance matrix estimators as an alternative to the sample estimator is considered an important approach for enhancing portfolio optimization. Here we empirically compare the performance of 9 improved covariance…
We measure the influence of different time-scales on the dynamics of financial market data. This is obtained by decomposing financial time series into simple oscillations associated with distinct time-scales. We propose two new time-varying…
This paper explores the effectiveness of high-frequency options trading strategies enhanced by advanced portfolio optimization techniques, investigating their ability to consistently generate positive returns compared to traditional long or…
We present a detailed study of the performance of a trading rule that uses moving average of past returns to predict future returns on stock indexes. Our main goal is to link performance and the stochastic process of the traded asset. Our…
The gain-loss asymmetry, observed in the inverse statistics of stock indices is present for logarithmic return levels that are over $2\%$, and it is the result of the non-Pearson type auto-correlations in the index. These non-Pearson type…
We provided proof here that coefficient of variation (CV) is a direct measure of risk using an equation that has been derived here for the first time. We also presented a method to generate a stock CV based on return that strongly…
Financial markets provide an ideal frame for the study of crossing or first-passage time events of non-Gaussian correlated dynamics mainly because large data sets are available. Tick-by-tick data of six futures markets are herein considered…
We develop a behavioral model for liquidity and volatility based on empirical regularities in trading order flow in the London Stock Exchange. This can be viewed as a very simple agent based model in which all components of the model are…
Financial time series typically exhibit strong fluctuations that cannot be described by a Gaussian distribution. In recent empirical studies of stock market indices it was examined whether the distribution P(r) of returns r(tau) after some…
It is well known that combining multiple hedge fund alpha streams yields diversification benefits to the resultant portfolio. Additionally, crossing trades between different alpha streams reduces transaction costs. As the number of alpha…
Mean-reverting assets are one of the holy grails of financial markets: if such assets existed, they would provide trivially profitable investment strategies for any investor able to trade them, thanks to the knowledge that such assets…
We propose and study a simple model of dynamical redistribution of capital in a diversified portfolio. We consider a hypothetical situation of a portfolio composed of N uncorrelated stocks. Each stock price follows a multiplicative random…
The popularity of modern portfolio theory has decreased among practitioners because of its unfavorable out-of-sample performance. Estimation errors tend to affect the optimal weight calculation noticeably, especially when a large number of…
In this paper, a statistical analysis of log-return fluctuations of the IPC, the Mexican Stock Market Index is presented. A sample of daily data covering the period from $04/09/2000-04/09/2010$ was analyzed, and fitted to different…
Investigations of inverse statistics (a concept borrowed from turbulence) in stock markets, exemplified with filtered Dow Jones Industrial Average, S&P 500, and NASDAQ, have uncovered a novel stylized fact that the distribution of exit time…
The cross-correlation matrix of daily returns of stock market indices in a diverse set of 37 countries worldwide was analyzed. Comparison of the spectrum of this matrix with predictions of random matrix theory provides an empirical evidence…
We consider a financial market in which two securities are traded: a stock and an index. Their prices are assumed to satisfy the Black-Scholes model. Besides assuming that the index is a tradable security, we also assume that it is…
We consider the following problem in stochastic portfolio theory. Are there portfolios that are relative arbitrages with respect to the market portfolio over very short periods of time under realistic assumptions? We answer a slightly…
We consider a few quantities that characterize trading on a stock market in a fixed time interval: logarithmic returns, volatility, trading activity (i.e., the number of transactions), and volume traded. We search for the power-law…