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Using an artificial neural network (ANN), a fixed universe of approximately 1500 equities from the Value Line index are rank-ordered by their predicted price changes over the next quarter. Inputs to the network consist only of the ten prior…
The rapid growth of e-commerce has made people accustomed to shopping online. Before making purchases on e-commerce websites, most consumers tend to rely on rating scores and review information to make purchase decisions. With this…
Most people are risk-averse (risk-seeking) when they expect to gain (lose). Based on a generalization of ``expected utility theory'' which takes this into account, we introduce an automaton mimicking the dynamics of economic operations.…
We investigate the impact of big winner stocks on the performance of active and passive investment strategies using a combination of numerical and analytical techniques. Our analysis is based on historical stock price data from 2006 to 2021…
A model is presented of the market dynamics to emphasis the effects of increasing returns to scale, including the description of the born and death of the adaptive producers. The evolution of market structure and its behavior with the…
In this paper we study the optimal investment and reinsurance problem of an insurance company whose investment preferences are described via a forward dynamic exponential utility in a regime-switching market model. Financial and actuarial…
This paper presents an optimal allocation problem in a financial market with one risk-free and one risky asset, when the market is driven by a stochastic market price of risk. We solve the problem in continuous time, for an investor with a…
We study the problem of optimal long term portfolio selection with a view to beat a benchmark. Two kinds of objectives are considered. One concerns the probability of outperforming the benchmark and seeks either to minimise the decay rate…
This paper addresses the challenge of model uncertainty in quantitative finance, where decisions in portfolio allocation, derivative pricing, and risk management rely on estimating stochastic models from limited data. In practice, the…
This paper examines the effect of macroeconomic news announcements (MNA) on the stock market. Stocks exhibit a strong positive response to major MNA: 1 standard deviation of MNA surprise causes 11-25 bps higher returns. This response is…
Financial price changes obey two universal properties: they follow a power law and they tend to be clustered in time. The second regularity, known as volatility clustering, entails some predictability in the price changes: while their sign…
Inspired by the recent literature on aggregation theory, we aim at relating the long range correlation of the stocks return volatility to the heterogeneity of the investors' expectations about the level of the future volatility. Based on a…
We review the evidence that the erratic dynamics of markets is to a large extent of endogenous origin, i.e. determined by the trading activity itself and not due to the rational processing of exogenous news. In order to understand why and…
We study the problem of determination of asset prices in an incomplete market proposing three different but related scenarios. One scenario uses a market game approach whereas the other two are based on risk sharing or regret minimizing…
Consumer protection rules require companies that deploy models to automate decisions in high-stakes settings to explain predictions to decision subjects. These rules are motivated, in part, by the belief that explanations can promote…
The price multiplier effect provides precious insight into the behavior of investors during episodes of speculative trading. It tells us that the higher the price of an asset is (within a set of similar assets) the more its price is likely…
We note a simple mechanism that may at least partially resolve several outstanding economic puzzles, including why the cyclically adjusted price to earnings ratio of the S&P 500 index has been oddly high for the past two decades, why gains…
We study portfolio selection in a complete continuous-time market where the preference is dictated by the rank-dependent utility. As such a model is inherently time inconsistent due to the underlying probability weighting, we study the…
We review the recently introduced concept of variety of a financial portfolio and we sketch its importance for risk control purposes. The empirical behaviour of variety, correlation, exceedance correlation and asymmetry of the probability…
To produce important investment decisions, investors require financial records and economic information. However, most companies manipulate investors and financial institutions by inflating their financial statements. Fraudulent Financial…