Related papers: Price predictability at ultra-high frequency: Entr…
We conduct an extensive evaluation of price jump tests based on high-frequency financial data. After providing a concise review of multiple alternative tests, we document the size and power of all tests in a range of empirically relevant…
We analyze the problem of the analytical characterization of the probability distribution of financial returns in the exponential Ornstein-Uhlenbeck model with stochastic volatility. In this model the prices are driven by a Geometric…
Sequential recommender systems have achieved steady gains in offline accuracy, yet it remains unclear how close current models are to the intrinsic accuracy limit imposed by the data. A reliable, model-agnostic estimate of this ceiling…
The Efficient Market Hypothesis has been a staple of economics research for decades. In particular, weak-form market efficiency -- the notion that past prices cannot predict future performance -- is strongly supported by econometric…
We develop an entropic framework to model the dynamics of stocks and European Options. Entropic inference is an inductive inference framework equipped with proper tools to handle situations where incomplete information is available. The…
In financial trading, return prediction is one of the foundation for a successful trading system. By the fast development of the deep learning in various areas such as graphical processing, natural language, it has also demonstrate…
We develop theory leading to testing procedures for the presence of a change point in the intraday volatility pattern. The new theory is developed in the framework of Functional Data Analysis. It is based on a model akin to the stochastic…
We study the emergence of instabilities in a stylized model of a financial market, when different market actors calculate prices according to different (local) market measures. We derive typical properties for ensembles of large random…
Uncertainty quantification (UQ) is crucial in machine learning, yet most (axiomatic) studies of uncertainty measures focus on classification, leaving a gap in regression settings with limited formal justification and evaluations. In this…
We show that infinite divisibility of a trading commodity leads to a self-sustained price bubble when traders use adaptive investment strategies. The adaptive strategy can be viewed as a psychological response of a trader to the situation…
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…
This paper provides insight into when, why, and how forecast strategies fail when they are applied to complicated time series. We conjecture that the inherent complexity of real-world time-series data---which results from the dimension,…
The Kullback-Leibler cluster entropy $\mathcal{D_{C}}[P \| Q] $ is evaluated for the empirical and model probability distributions $P$ and $Q$ of the clusters formed in the realized volatility time series of five assets (SP\&500, NASDAQ,…
Asynchronous trading in high-frequency financial markets introduces significant biases into econometric analysis, distorting risk estimates and leading to suboptimal portfolio decisions. Existing synchronization methods, such as the…
Regarding the intraday sequence of high frequency returns of the S&P index as daily realizations of a given stochastic process, we first demonstrate that the scaling properties of the aggregated return distribution can be employed to define…
This paper derives bounds for two omnipresent information theoretic measures, the Shannon entropy and its complementary dual, the extropy. Based on a large size data set from a logconcave model, the said bounds are obtained for the entropy…
Long memory and volatility clustering are two stylized facts frequently related to financial markets. Traditionally, these phenomena have been studied based on conditionally heteroscedastic models like ARCH, GARCH, IGARCH and FIGARCH, inter…
To reject the Efficient Market Hypothesis a set of 5 technical indicators and 23 fundamental indicators was identified to establish the possibility of generating excess returns on the stock market. Leveraging these data points and various…
High-frequency financial data of the foreign exchange market (EUR/CHF, EUR/GBP, EUR/JPY, EUR/NOK, EUR/SEK, EUR/USD, NZD/USD, USD/CAD, USD/CHF, USD/JPY, USD/NOK, and USD/SEK) are analyzed by utilizing the Kullback-Leibler divergence between…
Modelling accurately financial price variations is an essential step underlying portfolio allocation optimization, derivative pricing and hedging, fund management and trading. The observed complex price fluctuations guide and constraint our…