Related papers: The Rank Effect
We discovered that past changes in the market correlation structure are significantly related with future changes in the market volatility. By using correlation-based information filtering networks we device a new tool for forecasting the…
The capitalization-weighted total relative variation $\sum_{i=1}^d \int_0^\cdot \mu_i (t) \mathrm{d} \langle \log \mu_i \rangle (t)$ in an equity market consisting of a fixed number $d$ of assets with capitalization weights $\mu_i (\cdot)$…
Deep regression models typically learn in an end-to-end fashion without explicitly emphasizing a regression-aware representation. Consequently, the learned representations exhibit fragmentation and fail to capture the continuous nature of…
By monitoring the time evolution of the most liquid Futures contracts traded globally as acquired using the Bloomberg API from 03 January 2000 until 15 December 2014 we were able to forecast the S&P 500 index beating the Buy and Hold…
Using Random Matrix Theory, we propose a universal and versatile tool to reveal the existence of "fleeting modes", i.e. portfolios that carry statistically significant excess risk, signalling ex-post a change in the correlation structure in…
We show that recent stock market fluctuations are characterized by the cumulative distributions whose tails on short, minute time scales exhibit power scaling with the scaling index alpha > 3 and this index tends to increase quickly with…
We establish the existence of anomalous excess returns based on trend following strategies across four asset classes (commodities, currencies, stock indices, bonds) and over very long time scales. We use for our studies both futures time…
While conventional multinational firms (MNFs) often avoid taxes by transferring their profits to low-tax regions through markup on tangible asset costs, high-tech MNFs may avoid taxes by transferring royalty fees to intangible assets (i.e.,…
This paper analyzes the role of money in asset markets characterized by search frictions. We develop a dynamic framework that brings together a model for illiquid financial assets `a la Duffie, Garleanu, and Pedersen, and a search-theoretic…
In social network markets, the act of consumer choice in these industries is governed not just by the set of incentives described by conventional consumer demand theory, but by the choices of others in which an individual's payoff is an…
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…
We analyze the price return distributions of currency exchange rates, cryptocurrencies, and contracts for differences (CFDs) representing stock indices, stock shares, and commodities. Based on recent data from the years 2017--2020, we model…
We investigate how and when to diversify capital over assets, i.e., the portfolio selection problem, from a signal processing perspective. To this end, we first construct portfolios that achieve the optimal expected growth in i.i.d.…
The vast majority of market impact studies assess each product individually, and the interactions between the different order flows are disregarded. This strong approximation may lead to an underestimation of trading costs and possible…
Economic models with input-output networks assume that firm or sector (unit) growth is driven by a weighted sum of trade partners' growth and an independently-drawn idiosyncratic shock. I show that the idiosyncratic risk assumption in a…
We consider the problem of decomposing monetary risk in the presence of a fully traded market in {\it some} risks. We show that a mark-to-market approach to pricing leads to such a decomposition if the risk measure is time-consistent in the…
A basic assumption of traditional reinforcement learning is that the value of a reward does not change once it is received by an agent. The present work forgoes this assumption and considers the situation where the value of a reward decays…
In the seminal work [9], several macroscopic market observables have been introduced, in an attempt to find characteristics capturing the diversity of a financial market. Despite the crucial importance of such observables for investment…
Based on the work of Suzuki (2002), we consider a generalization of Merton's asset valuation approach (Merton, 1974) in which two firms are linked by cross-ownership of equity and liabilities. Suzuki's results then provide no arbitrage…
Over-the-counter markets are at the center of the postcrisis global reform of the financial system. We show how the size and structure of such markets can undergo rapid and extensive changes when participants engage in portfolio…