Related papers: Deconstructing the Low-Vol Anomaly
How can we address distribution shifts in stock price data to improve stock price prediction accuracy? Stock price prediction has attracted attention from both academia and industry, driven by its potential to uncover complex market…
This paper discusses a novel explanation for asymmetric volatility based on the anchoring behavioral pattern. Anchoring as a heuristic bias causes investors focusing on recent price changes and price levels, which two lead to a belief in…
The scaling properties of the time series of asset prices and trading volumes of stock markets are analysed. It is shown that similarly to the asset prices, the trading volume data obey multi-scaling length-distribution of low-variability…
We develop a theoretical trading conditioning model subject to price volatility and return information in terms of market psychological behavior, based on analytical transaction volume-price probability wave distributions in which we use…
Determination of the correct mix of dividend and retained earnings and its effect on profitability has been a subject of controversy in financial management literature. This paper seeks to contribute to the ongoing debate by examining the…
This paper considers an insurance company that faces two key constraints: a ratcheting dividend constraint and an irreversible reinsurance constraint. The company allocates part of its reserve to pay dividends to its shareholders while…
We investigate quantitatively the so-called leverage effect, which corresponds to a negative correlation between past returns and future volatility. For individual stocks, this correlation is moderate and decays exponentially over 50 days,…
Cross-sectional dispersion in firm-level realized skewness is significantly and negatively related to future stock market returns. The predictive power of skewness dispersion is robust to in-sample and out-of-sample estimation and is…
We study a model of a corporation which has the possibility to choose various production/business policies with different expected profits and risks. In the model there are restrictions on the dividend distribution rates as well as…
We propose a dynamical theory of market liquidity that predicts that the average supply/demand profile is V-shaped and {\it vanishes} around the current price. This result is generic, and only relies on mild assumptions about the order flow…
Let R be a positive random variable independent of S which is beta distributed. In this paper we are interested on the relation between the distribution function of R and that of RS. For this model we derive first some distributional…
We study the dynamic investment decisions of investors who prioritise specific quantiles of outcomes over their expected values. Downside-focused agents targeting low quantiles reduce risk in states with high variance, while those with a…
We investigate a continuous-time investment-consumption problem with model uncertainty in a general diffusion-based market with random model coefficients. We assume that a power utility investor is ambiguity-averse, with the preference to…
It has been widely observed that capitalization-weighted indexes can be beaten by surprisingly simple, systematic investment strategies. Indeed, in the U.S. stock market, equal-weighted portfolios, random-weighted portfolios, and other…
The leverage effect refers to the generally negative correlation between the return of an asset and the changes in its volatility. There is broad agreement in the literature that the effect should be present for theoretical reasons, and it…
This paper discusses an alternative explanation for the empirical findings contradicting the positive relationship between risk (variance) and reward (expected return). We show that these contradicting results might be due to the false…
We consider a discrete-time dividend payout problem with risk sensitive shareholders. It is assumed that they are equipped with a risk aversion coefficient and construct their discounted payoff with the help of the exponential premium…
Research has shown banks match interest income and expense betas, and thereby obtain net interest income margins which are insensitive to changes in short-term interest rates. The present analysis extends this research in a number of ways.…
In our empirical study, we examine the price of liquid stocks after experiencing a large intraday price change using data from the NYSE and the NASDAQ. We find significant reversal for both intraday price decreases and increases. The…
For the past two decades investors have observed long memory and highly correlated behavior of asset classes that does not fit into the framework of Modern Portfolio Theory. Custom correlation and standard deviation estimators consider…