Related papers: Optimal Investment Horizons
We review a resent {\em time-dependent} performance measure for economical time series -- the (optimal) investment horizon approach. For stock indices, the approach shows a pronounced gain-loss asymmetry that is {\em not} observed for the…
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…
Inverse statistics in economics is considered. We argue that the natural candidate for such statistics is the investment horizons distribution. This distribution of waiting times needed to achieve a predefined level of return is obtained…
This paper studies a continuous-time market {under stochastic environment} where an agent, having specified an investment horizon and a target terminal mean return, seeks to minimize the variance of the return with multiple stocks and a…
In recent publications, the authors have considered inverse statistics of the Dow Jones Industrial Averaged (DJIA) [1-3]. Specifically, we argued that the natural candidate for such statistics is the investment horizons distribution. This…
We consider an investor, whose portfolio consists of a single risky asset and a risk free asset, who wants to maximize his expected utility of the portfolio subject to managing the Value at Risk (VaR) assuming a heavy tailed distribution of…
The study of long-horizon returns has received a great deal of attention in recent years (see, for example, Boudoukh, Richardson, and Whitelaw (2008), Neuberger (2012) and Lee (2013), Fama and French (2018)). While most of the discussions…
We consider the tail probabilities of stock returns for a general class of stochastic volatility models. In these models, the stochastic differential equation for volatility is autonomous, time-homogeneous and dependent on only a finite…
We propose a new method of measuring the third and fourth moments of return distribution based on quadratic variation method when the return process is assumed to have zero drift. The realized third and fourth moments variations computed…
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 investigate the growth optimal strategy over a finite time horizon for a stock and bond portfolio in an analytically solvable multiplicative Markovian market model. We show that the optimal strategy consists in holding the amount of…
We study the probability distribution of stock returns at mesoscopic time lags (return horizons) ranging from about an hour to about a month. While at shorter microscopic time lags the distribution has power-law tails, for mesoscopic times…
Market timing is an investment technique that tries to continuously switch investment into assets forecast to have better returns. What is the likelihood of having a successful market timing strategy? With an emphasis on modeling…
This paper systematically conducts an analysis of the composite index 1-min datasets over the 17-year period (2005-2021) for both the Shanghai and Shenzhen stock exchanges. To reveal the difference between the Chinese and the mature stock…
We consider a continuous-time game-theoretic model of an investment market with short-lived assets and endogenous asset prices. The first goal of the paper is to formulate a stochastic equation which determines wealth processes of investors…
This survey reviews portfolio choice in settings where investment opportunities are stochastic due to, e.g., stochastic volatility or return predictability. It is explained how to heuristically compute candidate optimal portfolios using…
It is widely claimed in investment education and practice that extending the investment horizon reduces risk, and that diversifying investment timing, for example through dollar-cost averaging (DCA), further mitigates investment risk.…
This paper studies long term investing by an investor that maximizes either expected utility from terminal wealth or from consumption. We introduce the concepts of a generalized stochastic discount factor (SDF) and of the minimum price to…
The behavior of stock market returns over a period of 1-60 days has been investigated for S&P 500 and Nasdaq within the framework of nonextensive Tsallis statistics. Even for such long terms, the distributions of the returns are…
This paper describes the dependence of market-based statistical moments of returns on statistical moments and correlations of the current and past trade values. We use Markowitz's definition of value weighted return of a portfolio as the…