Related papers: Statistical inference for the EU portfolio in high…
Utility based methods provide a very general theoretically consistent approach to pricing and hedging of securities in incomplete financial markets. Solving problems in the utility based framework typically involves dynamic programming,…
A test based on tapering is proposed for use in testing a global linear hypothesis under a functional linear model. The test statistic is constructed as a weighted sum of squared linear combinations of Fourier coefficients, a tapered…
We investigate the problem of testing the global null in the high-dimensional regression models when the feature dimension $p$ grows proportionally to the number of observations $n$. Despite a number of prior work studying this problem,…
We analyze characteristics' joint predictive information through the lens of out-of-sample power utility functions. Linking weights to characteristics to form optimal portfolios suffers from estimation error which we mitigate by maximizing…
In this paper, we present a method for constructing a (static) portfolio of co-maturing European options whose price sign is determined by the skewness level of the associated implied volatility. This property holds regardless of the…
Despite the fast advances in high-sigma yield analysis with the help of machine learning techniques in the past decade, one of the main challenges, the curse of dimensionality, which is inevitable when dealing with modern large-scale…
We study the design of portfolios under a minimum risk criterion. The performance of the optimized portfolio relies on the accuracy of the estimated covariance matrix of the portfolio asset returns. For large portfolios, the number of…
We study the allocation of synthetic portfolios under hierarchical nested, one-factor, and diagonal structures of the population covariance matrix in a high-dimensional scenario. The noise reduction approaches for the sample realizations…
We derive new results related to the portfolio choice problem for power and logarithmic utilities. Assuming that the portfolio returns follow an approximate log-normal distribution, the closed-form expressions of the optimal portfolio…
The present article explores the application of randomized control techniques in empirical asset pricing and performance evaluation. It introduces geometric random walks, a class of Markov chain Monte Carlo methods, to construct flexible…
In nonstandard testing environments, researchers often derive ad hoc tests with correct (asymptotic) size, but their optimality properties are typically unknown a priori and difficult to assess. This paper develops a numerical framework for…
We study the sensitivity to estimation error of portfolios optimized under various risk measures, including variance, absolute deviation, expected shortfall and maximal loss. We introduce a measure of portfolio sensitivity and test the…
We study portfolio selection in a complete continuous-time market where the preference is dictated by the rank-dependent utility. As such a model is inherently time inconsistent due to the underlying probability weighting, we study the…
This paper explores the estimation of a panel data model with cross-sectional interaction that is flexible both in its approach to specifying the network of connections between cross-sectional units, and in controlling for unobserved…
This work derives an approximate analytical single period solution of the portfolio choice problem for the power utility function. It is possible to do so if we consider that the asset returns follow a multivariate normal distribution. It…
Analyzing large samples of high-dimensional data under dependence is a challenging statistical problem as long time series may have change points, most importantly in the mean and the marginal covariances, for which one needs valid tests.…
High-dimensional group inference is an essential part of statistical methods for analysing complex data sets, including hierarchical testing, tests of interaction, detection of heterogeneous treatment effects and inference for local…
In subgroup analysis, testing the existence of a subgroup with a differential treatment effect serves as protection against spurious subgroup discovery. Despite its importance, this hypothesis testing possesses a complicated nature:…
This paper introduces a quasi-likelihood ratio testing procedure for diffusion processes observed under nonsynchronous sampling schemes. High-frequency data, particularly in financial econometrics, are often recorded at irregular time…
In this paper, we present a realized range-based multipower variation theory, which can be used to estimate return variation and draw jump-robust inference about the diffusive volatility component, when a high-frequency record of asset…