Related papers: Common Idiosyncratic Quantile Factors and Asset Pr…
Large variations in stock prices happen with sufficient frequency to raise doubts about existing models, which all fail to account for non-Gaussian statistics. We construct simple models of a stock market, and argue that the large…
Sample measures of top centile contributions to the total (concentration) are downward biased, unstable estimators, extremely sensitive to sample size and concave in accounting for large deviations. It makes them particularly unfit in…
The valuation process that economic agents undergo for investments with uncertain payoff typically depends on their statistical views on possible future outcomes, their attitudes toward risk, and, of course, the payoff structure itself.…
Beta-sorted portfolios -- portfolios comprised of assets with similar covariation to selected risk factors -- are a popular tool in empirical finance to analyze models of (conditional) expected returns. Despite their widespread use, little…
We develop a pseudo maximum likelihood method for latent factor analysis in short panels without imposing sphericity nor Gaussianity. We derive an asymptotically uniformly most powerful invariant test for the number of factors. On a large…
We introduce a quantitative approach to comparative statics that allows to bound the maximum effect of an exogenous parameter change on a system's equilibrium. The motivation for this approach is a well known paradox in multimarket Cournot…
Volatilities, in high-dimensional panels of economic time series with a dynamic factor structure on the levels or returns, typically also admit a dynamic factor decomposition. We consider a two-stage dynamic factor model method recovering…
We analyzed multifractal properties of 5-minute stock returns from a period of over two years for 100 highly capitalized American companies. The two sources: fat-tailed probability distributions and nonlinear temporal correlations, vitally…
Firm foundation theory estimates a security's firm fundamental value based on four determinants: expected growth rate, expected dividend payout, the market interest rate and the degree of risk. In contrast, other views of decision-making in…
When analyzing the components influencing the stock prices, it is commonly believed that economic activities play an important role. More specifically, asset prices are more sensitive to the systematic economic news that impose a pervasive…
We revisit the index leverage effect, that can be decomposed into a volatility effect and a correlation effect. We investigate the latter using a matrix regression analysis, that we call `Principal Regression Analysis' (PRA) and for which…
We propose a Gaussian-copula-based framework that learns deal-level dependence directly from observed joint success frequencies across founder, geography, and market attributes. Holding marginal deal success probabilities fixed, deal-level…
We explore a decomposition in which returns on a large class of portfolios relative to the market depend on a smooth non-negative drift and changes in the asset price distribution. This decomposition is obtained using general continuous…
Given the success and almost universal acceptance of the simple linear regression three-factor model, it is interesting to analyze the informational content of the three factors in explaining stock returns when the analysis is allowed to…
We decompose returns for portfolios of bottom-ranked, lower-priced assets relative to the market into rank crossovers and changes in the relative price of those bottom-ranked assets. This decomposition is general and consistent with…
We study large deviation probabilities for a sum of dependent random variables from a heavy-tailed factor model, assuming that the components are regularly varying. We identify conditions where both the factor and the idiosyncratic terms…
This paper studies the estimation of characteristic-based quantile factor models where the factor loadings are unknown functions of observed individual characteristics while the idiosyncratic error terms are subject to conditional quantile…
In retrospect, the experimental findings on competitive market behavior called for a revival of the old, classical, view of competition as a collective higgling and bargaining process (as opposed to price-taking behaviors) founded on…
Commodity Trading Advisors (CTAs) have historically relied on trend-following rules that operate on vastly different horizons from long-term breakouts that capture major directional moves to short-term momentum signals that thrive in…
Recent financial disasters emphasised the need to investigate the consequence associated with the tail co-movements among institutions; episodes of contagion are frequently observed and increase the probability of large losses affecting…