Related papers: Understanding the Excess Bond Premium
Bayesian model comparison is often based on the posterior distribution over the set of compared models. This distribution is often observed to concentrate on a single model even when other measures of model fit or forecasting ability…
Researchers are more likely to share notable findings. As a result, published findings tend to overstate the magnitude of real-world phenomena. This bias is a natural concern for asset pricing research, which has found hundreds of return…
In the era of social media, every day billions of individuals produce content in socio-technical systems resulting in a deluge of information. However, human attention is a limited resource and it is increasingly challenging to consume the…
According to theoretical models of valuing risky corporate securities, risk of default is primary component in overall yield spread. However, sizable empirical literature considers it otherwise by giving more importance to non-default risk…
We study the excess growth rate -- a fundamental logarithmic functional arising in portfolio theory -- from the perspective of information theory. We show that the excess growth rate can be connected to the R\'{e}nyi and cross entropies,…
The Economic Policy Uncertainty index had gained considerable traction with both academics and policy practitioners. Here, we analyse news feed data to construct a simple, general measure of uncertainty in the United States using a highly…
As for other latent-variable problems, exact Bayesian analysis is typically not practicable for mixture problems and approximate methods have been developed. Variational Bayes tends to produce approximate posterior distributions for…
In this paper, we introduce an event-driven trading strategy that predicts stock movements by detecting corporate events from news articles. Unlike existing models that utilize textual features (e.g., bag-of-words) and sentiments to…
Bond rating Transition Probability Matrices (TPMs) are built over a one-year time-frame and for many practical purposes, like the assessment of risk in portfolios or the computation of banking Capital Requirements (e.g. the new IFRS 9…
Conformal prediction is a popular method to construct prediction intervals with marginal coverage guarantees from black-box machine learning models. In applications with potentially high-impact events, such as flooding or financial crises,…
In this paper we provide an asymptotic analysis of generalised bipower measures of the variation of price processes in financial economics. These measures encompass the usual quadratic variation, power variation and bipower variations which…
The use of robo-readers to analyze news texts is an emerging technology trend in computational finance. In recent research, a substantial effort has been invested to develop sophisticated financial polarity-lexicons that can be used to…
The relationship between electricity demand and weather is well established in power systems, along with the importance of behavioral and social aspects such as holidays and significant events. This study explores the link between…
We develop further the spot volatility estimator introduced in Hoffmann, Munk and Schmidt-Hieber (2012) from a practical point of view and make it useful for the analysis of high-frequency financial data. In a first part, we adjust the…
Analyses of voting algorithms often overlook informational externalities shaping individual votes. For example, pre-polling information often skews voters towards candidates who may not be their top choice, but who they believe would be a…
We study the stochastic multi-armed bandit (MAB) problem in the presence of side-observations across actions that occur as a result of an underlying network structure. In our model, a bipartite graph captures the relationship between…
Experiments on decision making under uncertainty are known to display a classical pattern of risk aversion and risk seeking referred to as "fourfold pattern" (or "reflection effect") , but recent experiments varying the speed and order of…
Accuracy of economic theories and efficiency of economic policy strictly depend on the choice of the economic variables and processes mostly liable for description of economic reality. That states the general problem of assessment of any…
We study belief revision when information is represented by a set of probability distributions, or general information. General information extends the standard event notion while including qualitative information (A is more likely than B),…
Income- and price-elasticity of demand quantify the responsiveness of markets to changes in income, and in prices, respectively. Under the assumptions of utility maximization and preference-independence (additive preferences), mathematical…