Related papers: Evaluating Investment Performance: The p-index and…
Given two random realized returns on an investment, which is to be preferred? This is a fundamental problem in finance that has no definitive solution except in the case one investment always returns more than the other. In 1952 Markowitz…
Investigations of inverse statistics (a concept borrowed from turbulence) in stock markets, exemplified with filtered Dow Jones Industrial Average, S&P 500, and NASDAQ, have uncovered a novel stylized fact that the distribution of exit time…
Returns distributions are heavy-tailed across asset classes. In this note, I examine the implications of this well-known stylized fact for the joint statistics of performance (absolute return) and Sharpe ratio (risk-adjusted return). Using…
The inverse statistics is the distribution of waiting times needed to achieve a predefined level of return obtained from (detrended) historic asset prices \cite{optihori,gainloss}. Such a distribution typically goes through a maximum at a…
This paper reexamines the profitability of loser, winner and contrarian portfolios in the Chinese stock market using monthly data of all stocks traded on the Shanghai Stock Exchange and Shenzhen Stock Exchange covering the period from…
We consider the estimation of the multi-period optimal portfolio obtained by maximizing an exponential utility. Employing Jeffreys' non-informative prior and the conjugate informative prior, we derive stochastic representations for the…
We empirically test predictability on asset price by using stock selection rules based on maximum drawdown and its consecutive recovery. In various equity markets, monthly momentum- and weekly contrarian-style portfolios constructed from…
This work initiates research into the problem of determining an optimal investment strategy for investors with different attitudes towards the trade-offs of risk and profit. The probability distribution of the return values of the stocks…
We present a systematic study of various statistical characteristics of high-frequency returns from the foreign exchange market. This study is based on six exchange rates forming two triangles: EUR-GBP-USD and GBP-CHF-JPY. It is shown that…
This paper considers a portfolio trading strategy formulated by algorithms in the field of machine learning. The profitability of the strategy is measured by the algorithm's capability to consistently and accurately identify stock indices…
We study how sentiment shocks propagate through equity returns and investor clientele using four independent proxies with sign-aligned kappa-rho parameters. A structural calibration links a one standard deviation innovation in sentiment to…
This article presents a comprehensive methodology for processing financial datasets of Apple Inc., encompassing quarterly income and daily stock prices, spanning from March 31, 2009, to December 31, 2023. Leveraging 60 observations for…
The patterns of different financial data sources vary substantially, and accordingly, investors exhibit heterogeneous cognition behavior in information processing. To capture different patterns, we propose a novel approach called the…
The dynamics of the equal-time cross-correlation matrix of multivariate financial time series is explored by examination of the eigenvalue spectrum over sliding time windows. Empirical results for the S&P 500 and the Dow Jones Euro Stoxx 50…
Being able to predict the occurrence of extreme returns is important in financial risk management. Using the distribution of recurrence intervals---the waiting time between consecutive extremes---we show that these extreme returns are…
We consider the general class of spectrally positive L\'evy risk processes, which are appropriate for businesses with continuous expenses and lump sum gains whose timing and sizes are stochastic. Motivated by the fact that dividends cannot…
In this paper, we use replica analysis to investigate the influence of correlation among the return rates of assets on the solution of the portfolio optimization problem. We consider the behavior of the optimal solution for the case where…
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…
One of the most important studies in finance is to find out whether stock returns could be predicted. This research aims to create a new multivariate model, which includes dividend yield, earnings-to-price ratio, book-to-market ratio as…
Among professionals and academics alike, it is well known that active portfolio management is unable to provide additional risk-adjusted returns relative to their benchmarks. For this reason, passive wealth management has emerged in recent…