Related papers: Complex economics of simple periodic systems
The effect of proportional transaction costs on systematically generated portfolios is studied empirically. The performance of several portfolios (the index tracking portfolio, the equally-weighted portfolio, the entropy-weighted portfolio,…
In this article we show that the payment flow of a linear tax on trading gains from a security with a semimartingale price process can be constructed for all c\`agl\`ad and adapted trading strategies. It is characterized as the unique…
The intermarket analysis, in particular the lead-lag relationship, plays an important role within financial markets. Therefore a mathematical approach to be able to find interrelations between the price development of two different…
The stochastic leverage effect, defined as the standardized covariation between the returns and their related volatility, is analyzed in a stochastic volatility model set-up. A novel estimator of the effect is defined using a pre-estimation…
In this paper, we present an adaptive investment strategy for environments with periodic returns on investment. In our approach, we consider an investment model where the agent decides at every time step the proportion of wealth to invest…
In portfolio optimization problems, the minimum expected investment risk is not always smaller than the expected minimal investment risk. That is, using a well-known approach from operations research, it is possible to derive a strategy…
A new model that combines economic growth rate fluctuations at the microscopic and macroscopic level is presented. At the microscopic level, firms are growing at different rates while also being exposed to idiosyncratic shocks at the firm…
Many dynamical phenomena display a cyclic behavior, in the sense that time can be partitioned into units within which distributional aspects of a process are homogeneous. In this paper, we introduce a class of models - called conjugate…
In financial markets, low prices are generally associated with high volatilities and vice-versa, this well known stylized fact usually being referred to as leverage effect. We propose a local volatility model, given by a stochastic…
The aim of this work is to establish the personal income distribution from the elementary constituents of a free market; products of a representative good and agents forming the economic network. The economy is treated as a self-organized…
Effort has been given for the development of an analytical approach that helps to address several sigmoidal and non-sigmoidal growth processes found in literature. In the proposed approach, the role of specific growth rate in different…
Fluctuations in parameters that are typically treated as fixed play a crucial role in the behavior of complex systems. However, to date, we lack a general non-equilibrium thermodynamic treatment of such a complex system. In this Letter, to…
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…
The operation of power systems is affected by diverse technical, economic and social factors. Social behaviour determines load patterns, electricity markets regulate the generation and weather-dependent renewables introduce power…
Effective risk control must make a tradeoff between the microprudential risk of exogenous shocks to individual institutions and the macroprudential risks caused by their systemic interactions. We investigate a simple dynamical model for…
We present an algorithm for the decomposition of periodic financial return data into orthogonal factors of expected return and "systemic", "productive", and "nonproductive" risk. Generally, when the number of funds does not exceed the…
We demonstrate that minority mechanisms arise in the dynamics of markets because of effects of price impact; accordingly the relative importance of minority and delayed majority mechanisms depends on the frequency of trading. We then use…
This paper considers possible price paths of a financial security in an idealized market. Its main result is that the variation index of typical price paths is at most 2, in this sense, typical price paths are not rougher than typical paths…
In this paper, we consider a discrete time economy where we assume that the short term interest rate follows a quadratic term structure of a regime switching asset process. The possible non-linear structure and the fact that the interest…
Researchers have constantly asked whether stock returns can be predicted by some macroeconomic data. However, it is known that macroeconomic data may exhibit nonstationarity and/or heavy tails, which complicates existing testing procedures…