Related papers: On the correlation analysis of illiquid stocks
Recent studies show that a negative shock in stock prices will generate more volatility than a positive shock of similar magnitude. The aim of this paper is to appraise the hypothesis under which the conditional mean and the conditional…
For the pedestrian observer, financial markets look completely random with erratic and uncontrollable behavior. To a large extend, this is correct. At first approximation the difference between real price changes and the random walk model…
Deriving the optimal safety stock quantity with which to meet customer satisfaction is one of the most important topics in stock management. However, it is difficult to control the stock management of correlated marketable merchandise when…
Properties of distributions of the number of trades in different intraday time intervals for five stocks traded in MICEX are studied. The dependence of the mean number of trades on the capital turnover is analyzed. Correlation analysis…
Markets efficiency implies that the stock returns are intrinsically unpredictable, a property that makes markets comparable to random number generators. We present a novel methodology to investigate ultra-high frequency financial data and…
In setting up a stochastic description of the time evolution of a financial index, the challenge consists in devising a model compatible with all stylized facts emerging from the analysis of financial time series and providing a reliable…
Distance correlation is a new measure of dependence between random vectors. Distance covariance and distance correlation are analogous to product-moment covariance and correlation, but unlike the classical definition of correlation,…
High frequency data in finance have led to a deeper understanding on probability distributions of market prices. Several facts seem to be well stablished by empirical evidence. Specifically, probability distributions have the following…
The Chinese stock market experienced an abrupt crash in 2015, and over one-third of its market value evaporated. Given its associations with fear and the fine resolution with respect to frequency, the illiquidity of stocks may offer a…
In this empirical paper we show that in the months following a crash there is a distinct connection between the fall of stock prices and the increase in the range of interest rates for a sample of bonds. This variable, which is often…
This paper considers the optimal portfolio selection problem in a dynamic multi-period stochastic framework with regime switching. The risk preferences are of exponential (CARA) type with an absolute coefficient of risk aversion which…
We develop a behavioral model for liquidity and volatility based on empirical regularities in trading order flow in the London Stock Exchange. This can be viewed as a very simple agent based model in which all components of the model are…
Maximum likelihood estimation applied to high-frequency data allows us to quantify intermittency in the fluctu- ations of asset prices. From time records as short as one month these methods permit extraction of a meaningful intermittency…
We generalize the recently proposed quantum model for the stock market by Zhang and Huang to make it consistent with the discrete nature of the stock price. In this formalism, the price of the stock and its trend satisfy the generalized…
Equity basket correlation can be estimated both using the physical measure from stock prices, and also using the risk neutral measure from option prices. The difference between the two estimates motivates a so-called "dispersion strategy''.…
In their seminal work Carr and Lee (2008) show how to robustly price and replicate a variety of claims written on the quadratic variation of a risky asset under the assumption that the asset's volatility process is independent of the…
This paper presents a novel dynamic network autoregressive conditional heteroscedasticity (ARCH) model based on spatiotemporal ARCH models to forecast volatility in the US stock market. To improve the forecasting accuracy, the model…
In our empirical study, we examine the price of liquid stocks after experiencing a large intraday price change using data from the NYSE and the NASDAQ. We find significant reversal for both intraday price decreases and increases. The…
In a general way, stock and bond prices do not display any significant correlation. Yet, if we concentrate our attention on specific episodes marked by a crash followed by a rebound, then we observe that stock prices have a strong…
We analyze daily prices of 29 commodities and 2449 stocks, each over a period of $\approx 15$ years. We find that the price fluctuations for commodities have a significantly broader multifractal spectrum than for stocks. We also propose…