Related papers: Sufficiency on the Stock Market
We study the stochastic structure of cryptocurrency rates of returns as compared to stock returns by focusing on the associated cross-sectional distributions. We build two datasets. The first comprises forty-six major cryptocurrencies, and…
This paper provides a holistic study of how stock prices vary in their response to financial disclosures across different topics. Thereby, we specifically shed light into the extensive amount of filings for which no a priori categorization…
We examine weak anticipations in discrete-time and continuous-time financial markets consisting of one risk-free asset and multiple risky assets, defining a minimal probability measure associated with the anticipation that does not depend…
We derive the most probable distribution of resources for a simple society. We find that a probabilistic analysis forbids both too much and too less equity, and selects instead a minimally ordered state. We give the detailed calculations…
Poker is in the family of imperfect information games unlike other games such as chess, connect four, etc which are perfect information game instead. While many perfect information games have been solved, no non-trivial imperfect…
We consider a model of contagion in financial networks recently introduced in the literature, and we characterize the effect of a few features empirically observed in real networks on the stability of the system. Notably, we consider the…
We analyze the relation between earning forecast accuracy and expected profitability of financial analysts. Modeling forecast errors with a multivariate Gaussian distribution, a complete characterization of the payoff of each analyst is…
Modern mainstream financial theory is underpinned by the efficient market hypothesis, which posits the rapid incorporation of relevant information into asset pricing. Limited prior studies in the operational research literature have…
The distribution of money is analysed in connection with the Boltzmann distribution of energy in the degenerate states of molecules. Plots of the population density of income distribution for various countries are well reproduced by a Gamma…
In the past decades, advanced probabilistic methods have had significant impact on the field of finance, both in academia and in the financial industry. Conversely, financial questions have stimulated new research directions in probability.…
There is substantial empirical evidence showing the fundamental portfolio outperforming the market portfolio. Here a theoretical foundation is laid that supports this empirical research. Assuming stock prices revert around fundamental…
Possibility theory offers a framework where both Lehmann's "preferential inference" and the more productive (but less cautious) "rational closure inference" can be represented. However, there are situations where the second inference does…
The majority of the statisticians concluded many decades ago that fiducial inference was nonsensical to them. Hannig et al. (2016) and others have, however, contributed to a renewed interest and focus. Fiducial inference is similar to…
A market model in Stochastic Portfolio Theory is a finite system of strictly positive stochastic processes. Each process represents the capitalization of a certain stock. If at any time no stock dominates almost the entire market, which…
The possibility of statistical evaluation of the market completeness and incompleteness is investigated for continuous time diffusion stock market models. It is known that the market completeness is not a robust property: small random…
We describe and develop a close relationship between two problems that have customarily been regarded as distinct: that of maximizing entropy, and that of minimizing worst-case expected loss. Using a formulation grounded in the equilibrium…
Excessive leverage, i.e. the abuse of debt financing, is considered one of the primary factors in the default of financial institutions. Systemic risk results from correlations between individual default probabilities that cannot be…
The sufficient-component cause framework assumes the existence of sets of sufficient causes that bring about an event. For a binary outcome and an arbitrary number of binary causes any set of potential outcomes can be replicated by positing…
This paper investigates portfolio selection within a continuous-time financial market with regime-switching and beliefs-dependent utilities. The market coefficients and the investor's utility function both depend on the market regime, which…
This paper studies implications of the consistency conditions among prior, posteriors, and information sets on introspective properties of qualitative belief induced from information sets. The main result reformulates the consistency…