Related papers: Deconstructing the Low-Vol Anomaly
In natural phenomena, data distributions often deviate from normality. One can think of cataclysms as a self-explanatory example: events that occur almost never, and at the same time are many standard deviations away from the common…
Returns distributions are heavy-tailed across asset classes. In this note, I examine the implications of this well-known stylized fact for the joint statistics of performance (absolute return) and Sharpe ratio (risk-adjusted return). Using…
In real-world decision-making problems, for instance in the fields of finance, robotics or autonomous driving, keeping uncertainty under control is as important as maximizing expected returns. Risk aversion has been addressed in the…
Adaptive populations such as those in financial markets and distributed control can be modeled by the Minority Game. We consider how their dynamics depends on the agents' initial preferences of strategies, when the agents use linear or…
Sharp asymptotic lower bounds of the expected quadratic variation of discretization error in stochastic integration are given. The theory relies on inequalities for the kurtosis and skewness of a general random variable which are themselves…
This paper describes an empirical study of shortfall optimization with Barra Extreme Risk. We compare minimum shortfall to minimum variance portfolios in the US, UK, and Japanese equity markets using Barra Style Factors (Value, Growth,…
We hypothesize that portfolio sorts based on the V/P ratio generate excess returns and consist of companies that are undervalued for prolonged periods. Results, for the US market show that high V/P portfolios outperform low V/P portfolios…
Control of drawdown, that is, the control of the drops in wealth over time from peaks to subsequent lows, is of great concern from a risk management perspective. With this motivation in mind, the focal point of this paper is to address the…
We study the relation between serial correlation of financial returns and volatility at intraday level for the S&P500 stock index. At daily and weekly level, serial correlation and volatility are known to be negatively correlated (LeBaron…
This paper examines the dividend and investment policies of a cash constrained firm that has access to costly external funding. We depart from the literature by allowing the firm to issue collateralized debt to increase its investment in…
The discrepancy between realized volatility and the market's view of volatility has been known to predict individual equity options at the monthly horizon. It is not clear how this predictability depends on a forecast's ability to predict…
This paper examines customer momentum, defined as a positive relationship between a firm's returns and past returns of its customers. I confirm previous evidence (Cohen and Frazzini 2008) that customer momentum is both statistically and…
Many natural and engineering systems involve the mixing of two fluid streams, in which the effects of density and viscosity gradients play important roles in determining flow stability. We perform linear stability calculations for a jet…
Volatility measures the amplitude of price fluctuations. Despite it is one of the most important quantities in finance, volatility is not directly observable. Here we apply a maximum likelihood method which assumes that price and volatility…
Large deviations for fat tailed distributions, i.e. those that decay slower than exponential, are not only relatively likely, but they also occur in a rather peculiar way where a finite fraction of the whole sample deviation is concentrated…
We show that the cost of market orders and the profit of infinitesimal market-making or -taking strategies can be expressed in terms of directly observable quantities, namely the spread and the lag-dependent impact function. Imposing that…
We consider an optimal stochastic control problem in which a firm's cash/surplus process is controlled by dividend payments and capital injections. Stockholders aim to maximize their dividend stream minus the cost of injecting capital, if…
The problem of the effects of compressibility and large-scale anisotropy on anomalous scaling behavior is considered for two models describing passive advection of scalar density and tracer fields. The advecting velocity field is Gaussian,…
This paper studies an optimal dividend problem for a company that aims to maximize the mean-variance (MV) objective of the accumulated discounted dividend payments up to its ruin time. The MV objective involves an integral form over a…
The coordinated and efficient distribution of limited resources by individual decisions is a fundamental, unsolved problem. When individuals compete for road capacities, time, space, money, goods, etc., they normally make decisions based on…