Related papers: The Evolving Causal Structure of Equity Risk Facto…
Scale invariance, collective behaviours and structural reorganization are crucial for portfolio management (portfolio composition, hedging, alternative definition of risk, etc.). This lack of any characteristic scale and such elaborated…
Recent years have seen many advances in methods for causal structure learning from data. The empirical assessment of such methods, however, is much less developed. Motivated by this gap, we pose the following question: how can one assess,…
We propose a new framework for measuring connectedness among financial variables that arises due to heterogeneous frequency responses to shocks. To estimate connectedness in short-, medium-, and long-term financial cycles, we introduce a…
Knowledge of the underlying causal relations is essential for inferring the effect of interventions in complex systems. In a widely studied approach, structural causal models postulate noisy functional relations among interacting variables,…
Modeling and managing portfolio risk is perhaps the most important step to achieve growing and preserving investment performance. Within the modern portfolio construction framework that built on Markowitz's theory, the covariance matrix of…
This work explores the characteristics of financial contagion in networks whose links distributions approaches a power law, using a model that defines banks balance sheets from information of network connectivity. By varying the parameters…
This paper proposes a portfolio construction framework designed to remain robust under estimation error, non-stationarity, and realistic trading constraints. The methodology combines dynamic asset eligibility, deterministic rebalancing, and…
We consider a conditional factor model for a multivariate portfolio of United States equities in the context of analysing a statistical arbitrage trading strategy. A state space framework underlies the factor model whereby asset returns are…
The theory of multilayer networks is in its early stages, and its development provides vital methods for understanding complex systems. Multilayer networks, in their multiplex form, have been introduced within the last three years to…
In the stochastic volatility models for multivariate daily stock returns, it has been found that the estimates of parameters become unstable as the dimension of returns increases. To solve this problem, we focus on the factor structure of…
The role of portfolio construction in the implementation of equity market neutral factors is often underestimated. Taking the classical momentum strategy as an example, we show that one can significantly improve the main strategy's features…
Markets have internal dynamics leading to excess volatility and other phenomena that are difficult to explain using rational expectations models. This paper studies these using a nonequilibrium price formation rule, developed in the context…
In finance, economics and many other fields, observations in a matrix form are often observed over time. For example, many economic indicators are obtained in different countries over time. Various financial characteristics of many…
The clarion call for causal reduction in the study of capital markets is intensifying. However, in self-referencing and open systems such as capital markets, the idea of unidirectional causation (if applicable) may be limiting at best, and…
Uncovering the heterogeneity of causal effects of policies and business decisions at various levels of granularity provides substantial value to decision makers. This paper develops estimation and inference procedures for multiple treatment…
Motivated by practical applications, we explore the constrained multi-period mean-variance portfolio selection problem within a market characterized by a dynamic factor model. This model captures predictability in asset returns driven by…
Evaluation of systemic risk in networks of financial institutions in general requires information of inter-institution financial exposures. In the framework of Debt Rank algorithm, we introduce an approximate method of systemic risk…
Among the various factors affecting the firms positioning and performance in modern day markets, capital structure of the firm has its own way of expressing itself as a crucial one. With the rapid changes in technology, firms are being…
Metastability is a phenomenon observed in stochastic systems which stay in a false-equilibrium within a region of its state space until the occurrence of a sequence of rare events that leads to an abrupt transition to a different region.…
When analyzing the components influencing the stock prices, it is commonly believed that economic activities play an important role. More specifically, asset prices are more sensitive to the systematic economic news that impose a pervasive…