Related papers: Characteristics-driven returns in equilibrium
Adaptive behavior in volatile environments requires agents to switch among value-control regimes across latent contexts, but maintaining separate preferences, policy biases, and action-confidence parameters for every situation is…
Toward explaining the persistence of biased inferences, we propose a framework to evaluate competing (mis)specifications in strategic settings. Agents with heterogeneous (mis)specifications coexist and draw Bayesian inferences about their…
Trend and Value are pervasive anomalies, common to all financial markets. We address the problem of their co-existence and interaction within the framework of Heterogeneous Agent Based Models (HABM). More specifically, we extend the…
In the information-based approach to asset pricing the market filtration is modelled explicitly as a superposition of signals concerning relevant market factors and independent noise. The rate at which the signal is revealed to the market…
We study a game between two firms in which each provide a service based on machine learning. The firms are presented with the opportunity to purchase a new corpus of data, which will allow them to potentially improve the quality of their…
We study identification of differentiated product demand from market-level data when product characteristics can be endogenous. Past work suggests nonparametric identification may be impossible: that is, in addition to standard price…
We investigate financial market correlations using random matrix theory and principal component analysis. We use random matrix theory to demonstrate that correlation matrices of asset price changes contain structure that is incompatible…
In light of the growing interest in agent-based market models, we bring together several earlier works in which we considered the topic of self-consistent market modelling. Building upon the binary game structure of Challet and Zhang, we…
Relational query optimisers rely on cost models to choose between different query execution plans. Selectivity estimates are known to be a crucial input to the cost model. In practice, standard selectivity estimation procedures are prone to…
We have shown, in a series of articles, that a classical description of a large number of economic agents can be replaced by a statistical fields formalism. To better understand the accumulation and allocation of capital among different…
This note investigates the causes of the quality anomaly, which is one of the strongest and most scalable anomalies in equity markets. We explore two potential explanations. The "risk view", whereby investing in high quality firms is…
What features characterise complex system dynamics? Power laws and scale invariance of fluctuations are often taken as the hallmarks of complexity, drawing on analogies with equilibrium critical phenomena[1-3]. Here we argue that slow,…
User opinions expressed in the form of ratings can influence an individual's view of an item. However, the true quality of an item is often obfuscated by user biases, and it is not obvious from the observed ratings the importance different…
We study overpricing in a repeated game between two representative agents: a market maker, who controls market liquidity, and a market taker, who chooses trade quantities. Market prices evolve through the endogenous price impact of trades…
Proceeding from the concept of rational expectations, a new dynamic model of supply and demand in a single market with one supplier, one buyer, and one kind of commodity is developed. Unlike the cob-web dynamic theories with adaptive…
It is known that the common factors in a large panel of data can be consistently estimated by the method of principal components, and principal components can be constructed by iterative least squares regressions. Replacing least squares…
Individual risk models need to capture possible correlations as failing to do so typically results in an underestimation of extreme quantiles of the aggregate loss. Such dependence modelling is particularly important for managing credit…
We investigate how asymmetric information affects equilibrium price formation in an economy with many interacting agents. Motivated by a finite-player model with two populations of asymmetrically informed agents, we study its mean-field…
In speculative markets, risk-free profit opportunities are eliminated by traders exploiting them. Markets are therefore often described as "informationally efficient", rapidly removing predictable price changes, and leaving only residual…
Estimation and counterfactual analysis in dynamic structural models rely on assumptions about the dynamic process of latent variables, which may be misspecified. We propose a framework to quantify the sensitivity of scalar parameters of…