Related papers: Non-parametric and semi-parametric asset pricing
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…
We study factor models augmented by observed covariates that have explanatory powers on the unknown factors. In financial factor models, the unknown factors can be reasonably well explained by a few observable proxies, such as the…
Under very general conditions, we construct a micro-macro model for closed economy with a large number of heterogeneous agents. By introducing both financial capital (i.e. valued capital---- equities of firms) and physical capital (i.e.…
The present study introduce the human capital component to the Fama and French five-factor model proposing an equilibrium six-factor asset pricing model. The study employs an aggregate of four sets of portfolios mimicking size and industry…
We consider the estimation of a sparse factor model where the factor loading matrix is assumed sparse. The estimation problem is reformulated as a penalized M-estimation criterion, while the restrictions for identifying the factor loading…
Income and risk coexist, yet investors are often so focused on chasing high returns that they overlook the potential risks that can lead to high losses. Therefore, risk forecasting and risk control is the cornerstone of investment. To…
Statistical inference in parametric models (e.g., the Bradley--Terry model and its variants) for paired-comparison data has been explored in the high-dimensional regime, in which the number of items involving in paired comparisons diverges.…
One fundamental statistical question for research areas such as precision medicine and health disparity is about discovering effect modification of treatment or exposure by observed covariates. We propose a semiparametric framework for…
Semiparametric forecasting and filtering are introduced as a method of addressing model errors arising from unresolved physical phenomena. While traditional parametric models are able to learn high-dimensional systems from small data sets,…
Increasing practical interest has been shown in regression problems where the errors, or disturbances, are centred in a way that reflects particular characteristics of the mechanism that generated the data. In economics this occurs in…
Hedge Funds are considered as one of the portfolio management sectors which shows a fastest growing for the past decade. An optimal Hedge Fund management requires an appropriate risk metrics. The classic CAPM theory and its Ratio Sharpe…
Difficulties may arise when analyzing longitudinal data using mixed-effects models if there are nonparametric functions present in the linear predictor component. This study extends the use of semiparametric mixed-effects modeling in cases…
In a meta-analysis, it is important to specify a model that adequately describes the effect-size distribution of the underlying population of studies. The conventional normal fixed-effect and normal random-effects models assume a normal…
A financial market is a system resulting from the complex interaction between participants in a closed economy. We propose a minimal microscopic model of the financial market economy based on the real economy's symmetry constraint and…
Beta coefficients for linear regression models represent the ideal form of an interpretable feature effect. However, for non-linear models and especially generalized linear models, the estimated coefficients cannot be interpreted as a…
We consider a financial market in which two securities are traded: a stock and an index. Their prices are assumed to satisfy the Black-Scholes model. Besides assuming that the index is a tradable security, we also assume that it is…
We present a general principle for estimating a regression function nonparametrically, allowing for a wide variety of data filtering, for example, repeated left truncation and right censoring. Both the mean and the median regression cases…
We derive a specific functional form for factor alpha decay -- hyperbolic decay alpha(t) = K/(1+lambda*t) -- from a game-theoretic equilibrium model, and test it against linear and exponential alternatives. Using eight Fama-French factors…
Multi-type Markov point processes offer a flexible framework for modelling complex multi-type point patterns where it is pertinent to capture both interactions between points as well as large scale trends depending on observed covariates.…
This work presents an asset pricing model that under rational expectation equilibrium perspective shows how, depending on risk aversion and noise volatility, a risky-asset has one equilibrium price that differs in term of efficiency: an…