Related papers: Capital Asset Pricing Model with Size Factor and N…
This paper investigates how to measure common market risk factors using newly proposed Panel Quantile Regression Model for Returns. By exploring the fact that volatility crosses all quantiles of the return distribution and using penalized…
In the field of quantitative finance, volatility models, such as ARCH, GARCH, FIGARCH, SV, EWMA, play the key role in risk and portfolio management. Meanwhile, factor investing is more and more famous since mid of 20 century. CAPM, Fama…
Classical portfolio optimization methods typically determine an optimal capital allocation through the implicit, yet critical, assumption of statistical time-invariance. Such models are inadequate for real-world markets as they employ…
This paper gives yet another definition of game-theoretic probability in the context of continuous-time idealized financial markets. Without making any probabilistic assumptions (but assuming positive and continuous price paths), we obtain…
The present study introduce the human capital component to the Fama and French five-factor model proposing an equilibrium six-factor asset pricing model. The study employs an aggregate of four sets of portfolios mimicking size and industry…
In this paper we test computationally the performance of CAPM in an evolutionary setting. In particular we study the stability of wealth distribution in a financial market where some traders invest as prescribed by CAPM and others behave…
An algorithm was recently introduced by INTECH for the purposes of estimating the trading-profit contribution of systematic rebalancing to the relative return of rules-based investment strategies. We apply this methodology to analyze the…
The CAPM regression is typically interpreted as if the market return contemporaneously \emph{causes} individual returns, motivating beta-neutral portfolios and factor attribution. For realized equity returns, however, this interpretation is…
Single index financial market models cannot account for the empirically observed complex interactions between shares in a market. We describe a multi-share financial market model and compare characteristics of the volatility, that is the…
Diversification of an investment into independently fluctuating assets reduces its risk. In reality, movement of assets are are mutually correlated and therefore knowledge of cross--correlations among asset price movements are of great…
Stock market returns are typically analyzed using standard regression, yet they reside on irregular domains which is a natural scenario for graph signal processing. To this end, we consider a market graph as an intuitive way to represent…
In this paper, we implement and evaluate a conditional diffusion model for asset return prediction and portfolio construction on large-scale equity data. Our method models the full distribution of future returns conditioned on firm…
Motivated by practical applications, we explore the constrained multi-period mean-variance portfolio selection problem within a market characterized by a dynamic factor model. This model captures predictability in asset returns driven by…
We consider a structural credit model for a large portfolio of credit risky assets where the correlation is due to a market factor. By considering the large portfolio limit of this system we show the existence of a density process for the…
Factor models have become a common and valued tool for understanding the risks associated with an investing strategy. In this report we describe Exabel's factor model, we quantify the fraction of the variability of the returns explained by…
In this paper, we are interested in continuous time models in which the index level induces some feedback on the dynamics of its composing stocks. More precisely, we propose a model in which the log-returns of each stock may be decomposed…
Market traders often engage in the frequent transaction of volatile assets to optimize their total return. In this study, we introduce a novel investment strategy model, anchored on the 'lazy factor.' Our approach bifurcates into a Price…
We introduce new mathematical methods to study the optimal portfolio size of investment portfolios over time, considering investors with varying skill levels. First, we explore the benefit of portfolio diversification on an annual basis for…
We investigate the random walk of prices by developing a simple model relating the properties of the signs and absolute values of individual price changes to the diffusion rate (volatility) of prices at longer time scales. We show that this…
We investigate how and when to diversify capital over assets, i.e., the portfolio selection problem, from a signal processing perspective. To this end, we first construct portfolios that achieve the optimal expected growth in i.i.d.…