Related papers: A global economic policy uncertainty index from pr…
It is widely known that the common risk-factors derived from PCA beyond the first eigenportfolio are generally difficult to interpret and thus to use in practical portfolio management. We explore a alternative approach (HPCA) which makes…
A principal component analysis based on the generalized Gini correlation index is proposed (Gini PCA). The Gini PCA generalizes the standard PCA based on the variance. It is shown, in the Gaussian case, that the standard PCA is equivalent…
Macroeconomic variables are known to significantly impact equity markets, but their predictive power for price fluctuations has been underexplored due to challenges such as infrequency and variability in timing of announcements, changing…
Growth rate of real GDP per capita, GDPpc, is represented as a sum of two components, a monotonically decreasing economic trend and fluctuations related to population change. The economic trend is modelled by an inverse function of GDPpc…
Assessing the contribution of various risk factors to future inflation risks was crucial for guiding monetary policy during the recent high inflation period. However, existing methodologies often provide limited insights by focusing solely…
This paper examines the dynamic relationship between electoral polls and indicators of economic and financial uncertainty during the last two U.S. presidential elections (2020 and 2024). Using daily polling data on Donald Trump and measures…
Through a novel approach, this paper shows that substantial change in stock market behavior has a statistically and economically significant impact on equity risk premium predictability both on in-sample and out-of-sample cases. In line…
Two network measures known as the Economic Complexity Index (ECI) and Product Complexity Index (PCI) have provided important insights into patterns of economic development. We show that the ECI and PCI are equivalent to a spectral…
We build on the interpretation of the Economic Complexity method as Correspondence Analysis (CA), and propose that the Canonical form of CA (CCA), which originated in the ecology literature, can be used to calculate multi-dimensional…
Most finance studies are discussed on the basis of several hypotheses, for example, investors rationally optimize their investment strategies. However, the hypotheses themselves are sometimes criticized. Market impacts, where trades of…
The global financial system is highly complex, with cross-border interconnections and interdependencies. In this highly interconnected environment, local financial shocks and events can be easily amplified and turned into global events.…
I characterize optimal government policy in a sticky-price economy with different types of consumers and endogenous financial constraints in the banking and entrepreneurial sectors. The competitive equilibrium allocation is constrained…
This study investigates the optimal strategy for a firm operating in a dynamic Keynesian market setting. The firm's objective function is optimized using the percent deviations from the symmetric equilibrium of both its own price and the…
This paper introduces the concept of a global financial market for environmental indices, addressing sustainability concerns and aiming to attract institutional investors. Risk mitigation measures are implemented to manage inherent risks…
This paper studies a continuous-time market {under stochastic environment} where an agent, having specified an investment horizon and a target terminal mean return, seeks to minimize the variance of the return with multiple stocks and a…
Principal component analysis (PCA) is a widely employed statistical tool used primarily for dimensionality reduction. However, it is known to be adversely affected by the presence of outlying observations in the sample, which is quite…
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…
Principal component analysis (PCA) is often used for analyzing data in the most diverse areas. In this work, we report an integrated approach to several theoretical and practical aspects of PCA. We start by providing, in an intuitive and…
This article conducts a literature review on the topic of monetary policy in developing countries and focuses on the effectiveness of monetary policy in promoting economic growth and the relationship between monetary policy and economic…
This paper develops a new model of business cycles. The model is economical in that it is solved with an aggregate demand-aggregate supply diagram, and the effects of shocks and policies are obtained by comparative statics. The model builds…