Related papers: Characteristics-driven returns in equilibrium
We present and discuss a stochastic model of financial assets dynamics based on the idea of an inverse renormalization group strategy. With this strategy we construct the multivariate distributions of elementary returns based on the scaling…
We extend prior evidence that naively using intraday agent-based models that involve realistic order-matching processes for modeling continuous-time double auction markets seems to fail to be able to provide a robust link between data and…
We present some numerical results obtained from a simple individual based model that describes clustering of organisms caused by competition. Our aim is to show how, even when a deterministic description developed for continuum models…
We introduce an equilibrium asset pricing model, which we build on the relationship between a novel risk measure, the Expected Downside Risk (EDR) and the expected return. On the one hand, our proposed risk measure uses a nonparametric…
It is commonly believed that the correlations between stock returns increase in high volatility periods. We investigate how much of these correlations can be explained within a simple non-Gaussian one-factor description with time…
This paper presents an axiomatic scheme for interest rate models in discrete time. We take a pricing kernel approach, which builds in the arbitrage-free property and provides a link to equilibrium economics. We require that the pricing…
Equity auctions display several distinctive characteristics in contrast to continuous trading. As the auction time approaches, the rate of events accelerates causing a substantial liquidity buildup around the indicative price. This, in…
In this paper we seek to demonstrate the predictability of stock market returns and explain the nature of this return predictability. To this end, we introduce investors with different investment horizons into the news-driven, analytic,…
This paper examines customer momentum, defined as a positive relationship between a firm's returns and past returns of its customers. I confirm previous evidence (Cohen and Frazzini 2008) that customer momentum is both statistically and…
In an equity market model with "Knightian" uncertainty regarding the relative risk and covariance structure of its assets, we characterize in several ways the highest return relative to the market that can be achieved using nonanticipative…
The dependence of the scaling properties of the structure factor on space dimensionality, range of interaction, initial and final conditions, presence or absence of a conservation law is analysed in the framework of the large-N model for…
Agent-based models help explain stock price dynamics as emergent phenomena driven by interacting investors. In this modeling tradition, investor behavior has typically been captured by two distinct mechanisms -- learning and heterogeneous…
A new framework for asset pricing based on modelling the information available to market participants is presented. Each asset is characterised by the cash flows it generates. Each cash flow is expressed as a function of one or more…
A broad set of empirical phenomenon in the study of social, economic and machine behaviour can be modelled as complex systems with averaging dynamics. However many of these models naturally result in consensus or consensus-like outcomes. In…
We build a state-of-the-art dynamic model of private asset allocation that considers five key features of private asset markets: (1) the illiquid nature of private assets, (2) timing lags between capital commitments, capital calls, and…
We study a discrete-time consumption-based capital asset pricing model under expectations-based reference-dependent preferences. More precisely, we consider an endowment economy populated by a representative agent who derives utility from…
We investigate possible origins of trends using a deterministic threshold model, where we refer to long-term variabilities of price changes (price movements) in financial markets as trends. From the investigation we find two phenomena. One…
We propose a stochastic model for claims reserving that captures dependence along development years within a single triangle. This dependence is of autoregressive form of order $p$ and is achieved through the use of latent variables. We…
It has become the default in markets such as ad auctions for participants to bid in an auction through automated bidding agents (autobidders) which adjust bids over time to satisfy return-over-spend constraints. Despite the prominence of…
An asset pricing model using long-run capital share growth risk has recently been found to successfully explain U.S. stock returns. Our paper adopts a recursive preference utility framework to derive an heterogeneous asset pricing model…