Related papers: Economic Forces in Stock Returns
We study the problem of optimal long term portfolio selection with a view to beat a benchmark. Two kinds of objectives are considered. One concerns the probability of outperforming the benchmark and seeks either to minimise the decay rate…
We model systemic risk using a common factor that accounts for market-wide shocks and a tail dependence factor that accounts for linkages among extreme stock returns. Specifically, our theoretical model allows for firm-specific impacts of…
New theoretical approaches about forecasting stock markets are proposed. A mathematization of the stock market in terms of arithmetical relations is given, where some simple (non-differential, non-fractal) expressions are also suggested as…
This paper examines the effects of U.S. presidential election cycles on sectoral stock markets. Using a high-frequency identification approach, I construct a novel "election shock'' series, which captures exogenous surprises in election…
A deterministic trading strategy can be regarded as a signal processing element that uses external information and past prices as inputs and incorporates them into future prices. This paper uses a market maker based method of price…
In order to understand the origin of stock price jumps, we cross-correlate high-frequency time series of stock returns with different news feeds. We find that neither idiosyncratic news nor market wide news can explain the frequency and…
The use of kinetic modelling based on partial differential equations for the dynamics of stock price formation in financial markets is briefly reviewed. The importance of behavioral aspects in market booms and crashes and the role of…
Algorithmic trading, due to its inherent nature, is a difficult problem to tackle; there are too many variables involved in the real world which make it almost impossible to have reliable algorithms for automated stock trading. The lack of…
The importance of predicting stock market prices cannot be overstated. It is a pivotal task for investors and financial institutions as it enables them to make informed investment decisions, manage risks, and ensure the stability of the…
We study the impact of oil price shocks on the U.S. stock market volatility. We jointly analyze three different structural oil market shocks (i.e., aggregate demand, oil supply, and oil-specific demand shocks) and stock market volatility…
A new approach to obtaining market--directional information, based on a non-stationary solution to the dynamic equation "future price tends to the value that maximizes the number of shares traded per unit time" [1] is presented. In our…
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…
In recent years, multi-factor strategies have gained increasing popularity in the financial industry, as they allow investors to have a better understanding of the risk drivers underlying their portfolios. Moreover, such strategies promise…
Stock price prediction is a complicated and interesting task. Noisy trends make stock pricing sensitive and complicated while the economical motivation behind, keeps it interesting for researchers and investors. In this paper we are to…
Most research questions in agricultural and applied economics are of a causal nature, i.e., how one or more variables (e.g., policies, prices, the weather) affect one or more other variables (e.g., income, crop yields, pollution). Only some…
A statistical generalization is made of microeconomics in the spirit of going from classical to statistical mechanics. The price and quantity of every commodity1 traded in the market, at each instant of time, is considered to be an…
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…
In financial markets, greater volatility is usually considered synonym of greater risk and instability. However, large market downturns and upturns are often preceded by long periods where price returns exhibit only small fluctuations. To…
We analyze the relative price change of assets starting from basic supply/demand considerations subject to arbitrary motivations. The resulting stochastic differential equation has coefficients that are functions of supply and demand. We…
Most finance studies are discussed on the basis of several hypotheses, for example, investors rationally optimize their investment strategies. However, the hypotheses themselves are sometimes criticized. Market impacts, where trades of…