Related papers: Quantifying instabilities in Financial Markets
This paper investigates the time-varying impacts of international macroeconomic uncertainty shocks. We use a global vector autoregressive specification with drifting coefficients and factor stochastic volatility in the errors to model six…
Financial market forecasting remains a formidable challenge despite the surge in computational capabilities and machine learning advancements. While numerous studies have underscored the precision of computer-generated market predictions,…
In speculative markets, risk-free profit opportunities are eliminated by traders exploiting them. Markets are therefore often described as "informationally efficient", rapidly removing predictable price changes, and leaving only residual…
The financial industry should be involved in mitigating the risk of downturns in the financial wellbeing indices around the world by implementing well-developed financial tools such as insurance instruments on the underlying wellbeing…
We explore a simple lattice field model intended to describe statistical properties of high frequency financial markets. The model is relevant in the cross-disciplinary area of econophysics. Its signature feature is the emergence of a…
Many financial and economic variables, including financial returns, exhibit nonlinear dependence, heterogeneity and heavy-tailedness. These properties may make problematic the analysis of (non-)efficiency and volatility clustering in…
Since the 1960s, the question whether markets are efficient or not is controversially discussed. One reason for the difficulty to overcome the controversy is the lack of a universal, but also precise, quantitative definition of efficiency…
Financial crises often occur without warning, yet markets leading up to these events display increasing volatility and complex interdependencies across multiple sectors. This study proposes a novel approach to predicting market crises by…
Many complex systems exhibit extreme events far more often than expected for a normal distribution. This work examines how self-similar bursts of activity across several orders of magnitude can emerge from first principles in systems that…
In traditional quantitative trading practice, navigating the complicated and dynamic financial market presents a persistent challenge. Fully capturing various market variables, including long-term information, as well as essential signals…
Financial markets across all asset classes are known to exhibit trends. These trends have been exploited by traders for decades. Here, we empirically measure when trends revert, based on 30 years of daily futures prices for equity indices,…
In the theory of financial markets, a stylized fact is a qualitative summary of a pattern in financial market data that is observed across multiple assets, asset classes and time horizons. In this article, we test a set of eleven stylized…
The aim of this work is to build financial crisis indicators based on spectral properties of the dynamics of market data. After choosing an optimal size for a rolling window, the historical market data in this window is seen every trading…
The recent crash demonstrated (once again) that the description of the financial market by present financial mathematics cannot be considered as totally satisfactory. We remind that nowadays financial mathematics is heavily based on the use…
In financial markets, greater volatility is usually considered synonym of greater risk and instability. However, large market downturns and upturns are often preceded by long periods where price returns exhibit only small fluctuations. To…
We propose a new set of stylized facts quantifying the structure of financial markets. The key idea is to study the combined structure of both investment strategies and prices in order to open a qualitatively new level of understanding of…
Multifractality is ubiquitously observed in complex natural and socioeconomic systems. Multifractal analysis provides powerful tools to understand the complex nonlinear nature of time series in diverse fields. Inspired by its striking…
This paper constructs internationally consistent measures of macroeconomic uncertainty. Our econometric framework extracts uncertainty from revisions in data obtained from standardized national accounts. Applying our model to post-WWII…
We present a model describing the competition between information transmission and decision making in financial markets. The solution of this simple model is recalled, and possible variations discussed. It is shown numerically that despite…
Financial event studies, ubiquitous in finance research, typically use linear factor models with known factors to estimate abnormal returns and identify causal effects of information events. This paper demonstrates that when factor models…