Related papers: Common Idiosyncratic Quantile Factors and Asset Pr…
We uncover a large and significant low-minus-high rank effect for commodities across two centuries. There is nothing anomalous about this anomaly, nor is it clear how it can be arbitraged away. Using nonparametric econometric methods, we…
We identify a new type of risk, common firm-level investor fears, from commonalities within the cross-sectional distribution of individual stock options. We define firm-level fears that link with upward price movements as good fears, and…
We discuss - in what is intended to be a pedagogical fashion - a criterion, which is a lower bound on a certain ratio, for when a stock (or a similar instrument) is not a good investment in the long term, which can happen even if the…
Quantile regression is an increasingly important empirical tool in economics and other sciences for analyzing the impact of a set of regressors on the conditional distribution of an outcome. Extremal quantile regression, or quantile…
This paper extends quantile factor analysis to a probabilistic variant that incorporates regularization and computationally efficient variational approximations. We establish through synthetic and real data experiments that the proposed…
We propose a random walk model of asset returns where the parameters depend on market stress. Stress is measured by, e.g., the value of an implied volatility index. We show that model parameters including standard deviations and…
Providing a measure of market risk is an important issue for investors and financial institutions. However, the existing models for this purpose are per definition symmetric. The current paper introduces an asymmetric capital asset pricing…
This paper develops a dynamic factor model in which common level and volatility factors evolve jointly, allowing conditional means and variances to interact endogenously within a large-information setting. The joint evolution of these…
Based on the tick-by-tick stock prices from the German and American stock markets, we study the statistical properties of the distribution of the individual stocks and the index returns in highly collective and noisy intervals of trading,…
Estimation of high-dimensional covariance matrices in latent factor models is an important topic in many fields and especially in finance. Since the number of financial assets grows while the estimation window length remains of limited…
Standard, PCA-based factor analysis suffers from a number of well known problems due to the random nature of pairwise correlations of asset returns. We analyse an alternative based on ICA, where factors are identified based on their…
Empirical evidence is given for a significant difference in the collective trend of the share prices during the stock index rising and falling periods. Data on the Dow Jones Industrial Average and its stock components are studied between…
We argue that an important contributing factor into market inefficiency is the lack of a robust mechanism for the stock price to rise if a company has good earnings, e.g., via buybacks/dividends. Instead, the stock price is prone to…
It is well known that the distribution of returns from various financial instruments are leptokurtic, meaning that the distributions have "fatter tails" than a Normal distribution, and have skew toward zero. This paper presents a graceful…
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…
We study several aspects of the so-called low-vol and low-beta anomalies, some already documented (such as the universality of the effect over different geographical zones), others hitherto not clearly discussed in the literature. Our most…
This paper introduces an econometric framework for analyzing cross-sectional dependence in the idiosyncratic volatilities of assets using high frequency data. We first consider the estimation of standard measures of dependence in the…
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…
We perform a systematic investigation on the components of the empirical multifractality of financial returns using the daily data of Dow Jones Industrial Average from 26 May 1896 to 27 April 2007 as an example. The temporal structure and…
We establish several new stylised facts concerning the intra-day seasonalities of stock dynamics. Beyond the well known U-shaped pattern of the volatility, we find that the average correlation between stocks increases throughout the day,…