Related papers: Market Efficiency in Foreign Exchange Markets
We investigate triangular arbitrage within the spot foreign exchange market using high-frequency executable prices. We show that triangular arbitrage opportunities do exist, but that most have short durations and small magnitudes. We find…
We consider the effects of the global financial crisis through a local Korean financial market around the 2008 crisis. We analyze 185 individual stock prices belonging to the KOSPI (Korea Composite Stock Price Index), cosidering three time…
We address the question of market efficiency using the Minority Game (MG) model. First we show that removing unrealistic features of the MG leads to models which reproduce a scaling behavior close to what is observed in real markets. In…
Mimicking and learning the long-term memory of efficient markets is a fundamental problem in the interaction between machine learning and financial economics to sequential data. Despite the prominence of this issue, current treatments…
In this paper we test the random walk hypothesis on the high frequency dataset of the bid--ask Deutschemark/US dollar exchange rate quotes registered by the inter-bank Reuters network over the period October 1, 1992 to September 30, 1993.…
The evolution of the probability distributions of Japan and US major market indices, NIKKEI 225 and NASDAQ composite index, and $JPY/DEM$ and $DEM/USD$ currency exchange rates is described by means of the Fokker-Planck equation (FPE). In…
We explore a decomposition in which returns on a large class of portfolios relative to the market depend on a smooth non-negative drift and changes in the asset price distribution. This decomposition is obtained using general continuous…
The Efficient Market Hypothesis (EMH) highlights the essence of financial news in stock price movement. Financial news comes in the form of corporate announcements, news titles, and other forms of digital text. The generation of insights…
Specialized topics on financial data analysis from a numerical and physical point of view are discussed. They pertain to the analysis of crash prediction in stock market indices and to the persistence or not of coherent and random sequences…
We revisit and demonstrate the Epps effect using two well-known non-parametric covariance estimators; the Malliavin and Mancino (MM), and Hayashi and Yoshida (HY) estimators. We show the existence of the Epps effect in the top 10 stocks…
In macroeconomics, an emerging discussion of alternative monetary systems addresses the dimensions of systemic risk in advanced financial systems. Monetary regime changes with the aim of achieving a more sustainable financial system have…
Trading large volumes of a financial asset in order driven markets requires the use of algorithmic execution dividing the volume in many transactions in order to minimize costs due to market impact. A proper design of an optimal execution…
A solution to a portfolio optimization problem is always conditioned by constraints on the initial capital and the price of the available market assets. If a risk neutral measure is known, then the price of each asset is the discounted…
Synchronization is a phenomenon in which a pair of fluctuations adjust their rhythms when interacting with each other. We measure the degree of synchronization between the U.S. dollar (USD) and euro exchange rates and between the USD and…
We investigate financial market correlations using random matrix theory and principal component analysis. We use random matrix theory to demonstrate that correlation matrices of asset price changes contain structure that is incompatible…
During a financial crisis, the capital markets network frequently exhibits a high correlation between returns. We developed a network analysis framework based on daily returns from 42 countries to determine systemic stability. Our network…
Identifying macroeconomic events that are responsible for dramatic changes of economy is of particular relevance to understand the overall economic dynamics. We introduce an open-source available efficient Python implementation of a…
Markets have internal dynamics leading to excess volatility and other phenomena that are difficult to explain using rational expectations models. This paper studies these using a nonequilibrium price formation rule, developed in the context…
We analyze the efficiency of markets with friction, particularly power markets. We model the market as a dynamic system with $(d_t;\,t\geq 0)$ the demand process and $(s_t;\,t\geq 0)$ the supply process. Using stochastic differential…
Financial market is an example of complex system, which is characterized by a highly intricate organization and the emergence of collective behavior. In this paper, we quantify this emergent dynamics in the financial market by using…