Related papers: Sufficiency on the Stock Market

We consider a financial market in which traders potentially face restrictions in trading some of the available securities. Traders are heterogeneous with respect to their beliefs and risk profiles, and the market is assumed thin: traders…

We consider strategies of investments into options and diffusion market model. It is shown that there exists a correct proportion between "put" and "call" in the portfolio such that the average gain is almost always positive for a generic…

This paper investigates a time-inconsistent portfolio selection problem in the incomplete mar ket model, integrating expected utility maximization with risk control. The objective functional balances the expected utility and variance on log…

We propose a game-theoretic framework that incorporates both incomplete information and general ambiguity attitudes on factors external to all players. Our starting point is players' preferences on payoff-distribution vectors, essentially…

We discuss the allocation of finite resources in the presence of a logarithmic diminishing return law, in analogy to some results from Information Theory. To exemplify the problem we assume that the proposed logarithmic law is applied to…

This paper discusses system consequence, a central idea in the project to lift the theory of information flow to the abstract level of universal logic and the theory of institutions. The theory of information flow is a theory of distributed…

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…

This paper investigates the equilibrium interactions between trading targets and private information in a multi-period Kyle (1985) market. There are two investors who each follow dynamic trading strategies: A strategic portfolio rebalancer…

Numerical analysts might be expected to pay close attention to a branch of complexity theory called information-based complexity theory (IBCT), which produces an abundance of impressive results about the quest for approximate solutions to…

To identify emerging interdependencies between traded stocks we investigate the behavior of the stocks of FTSE 100 companies in the period 2000-2015, by looking at daily stock values. Exploiting the power of information theoretical measures…

In 1956 John Kelly wrote a paper at Bell Labs describing the relationship between gambling and Information Theory. What came to be known as the Kelly Criterion is both an objective and a closed-form solution to sizing wagers when odds and…

Diversification represents the idea of choosing variety over uniformity. Within the theory of choice, desirability of diversification is axiomatized as preference for a convex combination of choices that are equivalently ranked. This…

We study the capital growth in gambling with (and without) side information and memory effects. We derive several equalities for gambling, which are of similar form to the Jarzynski equality and its extension to systems with feedback…

We investigated financial market data to determine which factors affect information flow between stocks. Two factors, the time dependency and the degree of efficiency, were considered in the analysis of Korean, the Japanese, the Taiwanese,…

Standard approaches to the theory of financial markets are based on equilibrium and efficiency. Here we develop an alternative based on concepts and methods developed by biologists, in which the wealth invested in a financial strategy is…

This paper attempts to find a relationship between agents' risk aversion and inequality of incomes. Specifically, a model is proposed for the evolution in time of surplus/deficit distribution, and the long-time distributions are…

Hierarchies of conditional beliefs (Battigalli and Siniscalchi 1999) play a central role for the epistemic analysis of solution concepts in sequential games. They are practically modelled by type structures, which allow the analyst to…

Index tracking is a popular form of asset management. Typically, a quadratic function is used to define the tracking error of a portfolio and the look back approach is applied to solve the index tracking problem. We argue that a forward…

We propose that predictability is a prerequisite for profitability on financial markets. We look at ways to measure predictability of price changes using information theoretic approach and employ them on all historical data available for…

Inequality and its consequences are the subject of intense recent debate. Using a simplified model of the economy, we address the relation between inequality and liquidity, the latter understood as the frequency of economic exchanges.…