Related papers: Dollar Cost Averaging Returns Estimation
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It is shown that the ratio between the expected diameter of an L2-bounded martingale and the standard deviation of its last term cannot exceed sqrt(3). Moreover, a one-parameter family of stopping times on standard Brownian Motion is…
For a sample of Exponentially distributed durations we aim at point estimation and a confidence interval for its parameter. A duration is only observed if it has ended within a certain time interval, determined by a Uniform distribution.…
The false discovery rate (FDR) measures the share of false positives in a set of statistical tests. I develop simple and intuitive bounds on the FDR in cross-sectional predictability publications. The simplest bound requires just a few…
In this paper, we develop a computational approach for estimating the mean value of a quantity in the presence of uncertainty. We demonstrate that, under some mild assumptions, the upper and lower bounds of the mean value are efficiently…
We establish explicit socially optimal rules for an irreversible investment deci- sion with time-to-build and uncertainty. Assuming a price sensitive demand function with a random intercept, we provide comparative statics and economic…
Trading styles can be classified into either trend-following or mean-reverting. If the net trading style is trend-following the traded asset is more likely to move in the same direction it moved previously (the opposite is true if the net…
We consider the consumption-based asset pricing model, derive a new modified basic pricing equation, and present its successive approximations using the Taylor series expansions of the investor's utility during the averaging time interval.…
We give a new predictive mathematical model for macroeconomics, which deals specifically with asset prices and earnings fluctuations, in the presence of a dynamic economy involving mergers, acquisitions, and hostile takeovers. Consider a…
This paper builds a model of high-frequency equity returns by separately modeling the dynamics of trade-time returns and trade arrivals. Our main contributions are threefold. First, we characterize the distributional behavior of…
The analysis of logarithmic return distributions defined over large time scales is crucial for understanding the long-term dynamics of asset price movements. For large time scales of the order of two trading years, the anticipated Gaussian…
The notion of a credit spread curve is fundamental in fixed income investing, but in practice it is not `given' and needs to be constructed from bond prices either for a particular issuer, or for a sector rating-by-rating. Rather than…
This paper develops a nonparametric statistical model of wealth distribution that imposes little structure on the fluctuations of household wealth. In this setting, we use new techniques to obtain a closed-form household-by-household…
A trading system is said to be {robust} if it generates a robust return regardless of market direction. To this end, a consistently positive expected trading gain is often used as a robustness metric for a trading system. In this paper, we…
Mean-reverting behavior of individuals assets is widely known in financial markets. In fact, we can construct a portfolio that has mean-reverting behavior and use it in trading strategies to extract profits. In this paper, we show that we…
We establish the existence of anomalous excess returns based on trend following strategies across four asset classes (commodities, currencies, stock indices, bonds) and over very long time scales. We use for our studies both futures time…
In most real scenarios the construction of a risk-neutral portfolio must be performed in discrete time and with transaction costs. Two human imposed constraints are the risk-aversion and the profit maximization, which together define a…
We derive explicit formulas for probabilities of Brownian motion with jumps crossing linear or piecewise linear boundaries in any finite interval. We then use these formulas to approximate the boundary crossing probabilities for general…
We develop a finite horizon continuous time market model, where risk averse investors maximize utility from terminal wealth by dynamically investing in a risk-free money market account, a stock written on a default-free dividend process,…
We present a detailed study of the performance of a trading rule that uses moving average of past returns to predict future returns on stock indexes. Our main goal is to link performance and the stochastic process of the traded asset. Our…