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Income and risk coexist, yet investors are often so focused on chasing high returns that they overlook the potential risks that can lead to high losses. Therefore, risk forecasting and risk control is the cornerstone of investment. To…
Consider an investor trading dynamically to maximize expected utility from terminal wealth. Our aim is to study the dependence between her risk aversion and the distribution of the optimal terminal payoff. Economic intuition suggests that…
We study the continuous time portfolio optimization model on the market where the mean returns of individual securities or asset categories are linearly dependent on underlying economic factors. We introduce the functional $Q_\gamma$…
Modern quantitative trading increasingly relies on systematic models to extract predictive signals from large-scale financial data, where alpha factor discovery plays a central role in transforming market observations into tradable signals.…
Optimal investment strategies of an individual worker during the accumulation phase in the defined contribution pension scheme have been well studied in the literature. Most of them adopted the classical backward model and approach, but any…
In performative prediction, predictions guide decision-making and hence can influence the distribution of future data. To date, work on performative prediction has focused on finding performatively stable models, which are the fixed points…
We explore the realized alpha-performance heterogeneity in green and brown stocks' universes using the peer performance ratios of Ardia and Boudt (2018). Focusing on S&P 500 index firms over 2014-2020 and defining peer groups in terms of…
Identifying the number of factors in a high-dimensional factor model has attracted much attention in recent years and a general solution to the problem is still lacking. A promising ratio estimator based on the singular values of the lagged…
In all competitions where results are based upon an individual's performance the question of whether the outcome is a consequence of skill or luck arises. We explore this question through an analysis of a large dataset of approximately one…
Ever since the seminal work of R. A. Fisher and F. Yates, factorial designs have been an important experimental tool to simultaneously estimate the effects of multiple treatment factors. In factorial designs, the number of treatment…
Mining of formulaic alpha factors refers to the process of discovering and developing specific factors or indicators (referred to as alpha factors) for quantitative trading in stock market. To efficiently discover alpha factors in vast…
This article aims to combine factor investing and reinforcement learning (RL). The agent learns through sequential random allocations which rely on firms' characteristics. Using Dirichlet distributions as the driving policy, we derive…
This paper analyses the investment returns of three stock sectors, Manuf, Hitec, and Other, in the U.S. stock market, based on the Fama-French three-factor model, the Carhart four-factor model, and the Fama-French five-factor model, in…
On a periodic basis, publicly traded companies are required to report fundamentals: financial data such as revenue, operating income, debt, among others. These data points provide some insight into the financial health of a company.…
Sentiment analysis, widely used in product reviews, also impacts financial markets by influencing asset prices through microblogs and news articles. Despite research in sentiment-driven finance, many studies focus on sentence-level…
We develop a simple stock selection model to explain why active equity managers tend to underperform a benchmark index. We motivate our model with the empirical observation that the best performing stocks in a broad market index often…
Tracking the build-up of financial vulnerabilities is a key component of financial stability policy. Due to the complexity of the financial system, this task is daunting, and there have been several proposals on how to manage this goal. One…
We build a multiassets heterogeneous agents model with fundamentalists and chartists, who make investment decisions by maximizing the constant relative risk aversion utility function. We verify that the model can reproduce the main stylized…
We combine forward investment performance processes and ambiguity averse portfolio selection. We introduce the notion of robust forward criteria which addresses the issues of ambiguity in model specification and in preferences and…
While traditional equity factor investing relies heavily on slow-moving fundamental accounting metrics, these models frequently suffer from factor crowding and miss real-time, sentiment-driven market dislocations. This study explores how…