Related papers: Does the price multiplier effect also hold for sto…
In this paper, we investigate the cooling-off effect (opposite to the magnet effect) from two aspects. Firstly, from the viewpoint of dynamics, we study the existence of the cooling-off effect by following the dynamical evolution of some…
The value of stocks, indices and other assets, are examples of stochastic processes with unpredictable dynamics. In this paper, we discuss asymmetries in short term price movements that can not be associated with a long term positive trend.…
Recent research on the response of stock prices to trading activity revealed long lasting effects, even across stocks of different companies. These results imply non-Markovian effects in price formation and when trading many stocks at the…
The trade of a fixed stock can be regarded as the basic process that measures its momentary price. The stock price is exactly known only at the time of sale when the stock is between traders, that is, only in the case when the owner is…
We discuss - in what is intended to be a pedagogical fashion - a criterion, which is a lower bound on a certain ratio, for when a stock (or a similar instrument) is not a good investment in the long term, which can happen even if the…
The statistical properties of the multipliers of the absolute returns are investigated using one-minute high-frequency data of financial time series. The multiplier distribution is found to be independent of the box size $s$ when $s$ is…
Price dynamics is analyzed in terms of a model which includes the possibility of effective forces due to trend followers or trend adverse strategies. The method is tested on the data of a minority-majority model and indeed it is capable of…
In this empirical paper we show that in the months following a crash there is a distinct connection between the fall of stock prices and the increase in the range of interest rates for a sample of bonds. This variable, which is often…
Many studies assume stock prices follow a random process known as geometric Brownian motion. Although approximately correct, this model fails to explain the frequent occurrence of extreme price movements, such as stock market crashes. Using…
This paper proposes a theory of stock market predictability patterns based on a model of heterogeneous beliefs. In a discrete finite time framework, some agents receive news about an asset's fundamental value through a noisy signal. The…
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…
We describe and document three mechanisms by which corporations can influence or even control stock prices. (i) Parent and holding companies wield control over other publicly traded companies. (ii) Through clever management of treasury…
A deterministic trading strategy by a representative investor on a single market asset, which generates complex and realistic returns with its first four moments similar to the empirical values of European stock indices, is used to simulate…
We analyze the interaction between stock prices of big companies in the USA and Germany using Granger Causality. We claim that the increase in pair-wise Granger causality interaction between prices in the times of crisis is the consequence…
A speculative agent with Prospect Theory preference chooses the optimal time to purchase and then to sell an indivisible risky asset to maximize the expected utility of the round-trip profit net of transaction costs. The optimization…
Equity premium, the surplus returns of stocks over bonds, has been an enduring puzzle. While numerous prior works approach the problem assuming the utility of money is invariant across contexts, our approach implies that in efficient…
The price of financial assets are, since Bachelier, considered to be described by a (discrete or continuous) time sequence of random variables, i.e a stochastic process. Sharp scaling exponents or unifractal behavior of such processes has…
This note investigates the causes of the quality anomaly, which is one of the strongest and most scalable anomalies in equity markets. We explore two potential explanations. The "risk view", whereby investing in high quality firms is…
In this paper we propose a new model for pricing stock and dividend derivatives. We jointly specify dynamics for the stock price and the dividend rate such that the stock price is positive and the dividend rate non-negative. In its simplest…
We consider a financial market in which traders potentially face restrictions in trading some of the available securities. Traders are heterogeneous with respect to their beliefs and risk profiles, and the market is assumed thin: traders…