The science that describes the management, creation and study of money, banking, credit, investments, assets and liabilities.

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7 views

using lmer to attain the t statistics for the difference in alpha in two regressions

So I have 10 bond return time-series dataset (portfolio1 to portfolio10). Portfolio1 is the ...
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18 views

Event Study - Event Induced Volatility for One Firm

Normally, in a stock price event study, we assume that the daily variance in the estimation period is the same as that during the event window. The event-induced volatility literature (eg, Boehmer, ...
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62 views

R - suggested precedures in caret to fit stable precise binary classifiers to financial data

Building a binary precise classifier to forecast financial outcomes (stock rise vs. fall) brings up some nifty complications within caret. 1. classifier selection: there are tons of classifiers ...
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4 views

Can we use negative values as inputs or outputs in data envelopment analysis(DEA) in a financial case?

I'm comparing some financial companies using data envelopment analysis(DEA) using their financial statements. Suppose that one of the outputs is income or profit. In some companies we have negative ...
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1answer
16 views

Test for significance of peaks (maximum) in time series

I have a time series of values, something like this: ...
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29 views

Effect of Federal Funds Rate on SP500

I have been trying to examine the effect of the Federal Funds Rate on the S&P 500 using regression analysis. Obviously via the graph its easy to see this is a hard relationship to define over a ...
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12 views

Low adj. R squared Linear Regression in Financial Data - Misspecification?

Im doing a Multiple Linear Regression on Cumulated Abnormal Average Returns. In particular I measure stock effect changes on entrys in airline alliances. I measure the effect on the already existing ...
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36 views

Historical Data Nightmare [closed]

I've been trying to make sense of the historical data downloaded from Yahoo Finance. One time series is especially puzzling, that of Valeo SA (ticket: FR.PA). The picture is pretty self-explanatory ...
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30 views

PDF of sums, products of iid Normals

I've recently taken to looking at the distribution of a financial time series of the form $$X_t = X_{t-1}(1+W_t)$$ where $W_t$ is iid $N(0,\sigma^2)$. Expanding the equation out we get $$X_t = ...
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12 views

How to calculate returns when number of securities in a time-series varies over time?

I have a timeseries of security returns in which the number of securities in the timeseries varies over time. More specifically, I have a universe of events where securities(their returns) are added ...
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40 views

How to construct non overlapping data from futures and futures spot prices?

Could not really find anything across the board, so my question is - How exactly should I construct non overlapping data from two time series futures (with 3 months delivery) prices and cash prices?
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20 views

Vector Autoregression for modelling log-returns?

I am wondering if Vector Autoregression (and other autoregressive models) is a sound modelling for the daily (not high-frequency!) log-returns of time series from liquid financial markets. One can ...
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1answer
26 views

Data trending decision criteria

I'm playing a game in which you can buy and sell items (it's an mmorpg). Now, after certain events, there is a huge drop in the price of certain items (there is a seasonal double experience weekend in ...
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1answer
90 views

How to identify studies that should be replicated?

In psychology voting on which studies should be replicated is established on a website. The ReplicationWiki (that I founded) offers a voting option for studies in economics and related fields, but it ...
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1answer
17 views

How to properly calculate average need-based aid met by an institution?

As an institution we give out a certain amount of financial aid every year (need-based aid) to each student. This need-based aid does not always meet the students estimated need. My task is to compare ...
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2answers
52 views

Interpretation of standard deviation if data is not normally distributed

This is very basic question. But I want to know how one can interpret the standard deviation if data is not normally distributed. My concern is regarding financial market. Investors generally use ...
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15 views

2 State Endogeneity Procedure: Same variables in both stages

I came across an interesting endogeneity procedure in a recent Journal of Finance paper (Cai, Garner, and Walkling, 2009), but I can't quite grasp the logic behind it. In the first stage (p. 2401 in ...
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18 views

Real-time accounting input valdiation

I'm currently fishing in troubled waters, as I've got a huge scope. I'm sorry in case this question had been asked already in before, however I couldn't find even a topic to look for with my small ...
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1answer
45 views

Running regressions where coefficients change over time

I'm trying to predict monthly stock price returns using 93 features that I think may be relevant. I have data for these features from 1990 to 2015. For each month from 1990 to 2015 I run a ...
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30 views

Propensity score - how to deal with panel data?

I am researching mergers and acquisitions. The overlying question is the following: Do companies acquiring targets in a merger wave (i.e. a period of time where abnormally many acqusitions take place) ...
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57 views

Easy explanation of how to fit a multivariate GARCH model (in Gretl)

I have multiple financial time series data (FX-rates, commodity prices) that have been recorded daily (without weekends) for the past six years and want to analyze their effect/influence on the stock ...
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1answer
32 views

How can I slowly decay a percentage over time (not linearly)?

I'm not a statistician, but I am incredibly interested in personal finance, budgeting, and investment management. I've been building a large spreadsheet of my personal expenses, savings, and ...
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22 views

mean absolute deviation implies covariance matrix not needed?

I have a model for something for which the objective function has a measure of risk by using mean absolute deviation. Why would this imply that a covariance matrix would no longer be needed? (To add ...
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13 views

Can a Percentage Change series be an independent variable in a regression?

i.e. Quarterly GDP growth from 2000-2010 used to explain a company's revenue trends for same period. Or do I have to use the actual $ value of the GDP?
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33 views

How to test two indices equivalent?

Suppose I have two index time series, which are supposed to reflect the same information for a market, like SP500 and Dow Jones. Besides R2 from a simple linear regression, KS test, correlation ...
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24 views

Check significance of Patell t-test

Friends! I am trying to do an event study using R. Other than using normal t-test, I am also trying Patell t-test (1976) and BMP t-test. (as discussed on page 26 of this paper ...
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1answer
127 views

Have MLE estimators for Generalized Pareto Distribution. Given a known value of $c$, how do I calculate $a$ and $b$ using the provided estimators?

I am doing research into the three parameter Generalized Pareto Distribution $$ f(x|a,b,c) = \frac 1 b\left(1+a\left(\frac{x-c}{b}\right)\right)^{\big(-1-\frac 1 a\big)} $$ for finding VaR and CVaR. ...
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23 views

Monte Carlo VaR assuming logistic distribution

I have a Monte Carlo model which measures the Value at Risk (VaR) for given portfolio. I use the geometric brownian motion to model the prices. But let's say I assumed the returns of prices follow the ...
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6 views

Forecasting in a panel: full sample with zeros or unbalanced sample?

I am struggling with an econometric question.  Suppose I use google searches at time t about stock i (lets call it Xit) to forecast financial returns on stock s at time t+1.  So the basic model ...
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16 views

A test for comparing if two vectors are keeping the relative order between elements [duplicate]

I would like to perform a test in R to compare two vectors: the test should check if the two vectors are keeping the relative order between elements. for example if the first vector is x=(2,4) and ...
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23 views

What are data envelopment analysis(DEA) alternatives to calculate efficiency?

We can calculate efficiency using parametric (econometric models) and non-parametric models. one of the well-known non-parametric models to calculate efficiency (for example banking efficiency in a ...
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21 views

Assessing the impact of the European sovereign debt crisis on the EURUSD

As the title suggests, I am trying to estimate the impact of developments in the European sovereign debt crisis on the EURUSD (the spot price of exchanging X dollars into 1 Euro). I am a little rusty ...
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2answers
99 views

What is a good way to model this set of time-series data? What might the distribution be? (Personal expenses)

I'm trying to make some sense out of this data, but have been having some trouble. The data is of personal expenses made during the last 90 days. How would one go about the modeling this type of data? ...
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34 views

FORECASTING AR(1) Autoregressive Form

Ive been implementing a little exercise to obtain the first 2 forecasting points of an AR(1) process. And i want to have the forecasting ponts using the three forms: Im folowing this pdf ...
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37 views

How to equal weight and value weight a portfolio of mutual fund returns?

I have the historical monthly returns of around 3000 mutual funds. How would I equal weight them? And does 'value weighting' them include multiplying each set of fund returns by a factor ...
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1answer
443 views

Difference between Time delayed neural networks and Recurrent neural networks

I would like to use a Neural Network to predict financial time series. I come from an IT background and have some knowledge of Neural Networks and I have been reading about these: TDNN RNN I have ...
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20 views

Getting VAR parameters from research paper

Many econometrics papers provide the parameters used in their VAR model. If I notate my VAR model as $$z_{t+1} = c + B z_{t} + \Sigma \epsilon_{t+1}$$ where $\epsilon \sim N(0, I)$, then I need to ...
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1answer
424 views

Testing Sharpe Ratio significance

What is the proper way to test the significance of Sharpe Ratios or Information Ratios? The Sharpe Ratios will be based on various equity indices and may have variable look-back periods. One solution ...
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1answer
80 views

Books on using SAS to analyze market risk

Is there a book that teaches you how to use SAS to analyze the market risk of a portfolio of stocks,bonds and options?
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35 views

Weather analysis | company sales

I'm writing a python code that reads in a csv file of rain in inches for a given zip code and creates a normal distribution from the data. Ultimately, I want to be able to create some score for the ...
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0answers
28 views

How to test hypothesis on the composition of CAPM portfolios

I'm facing two different portfolios in CAPM framework derived as $$\hat{\omega}_P=\hat{\Sigma}^{-1}\frac{E(r)-r_f}{H}(\hat{\mu}-\iota'r_f)$$ on the same assets but, for example, on different time ...
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283 views

Implementing the Bayesian Information Criterion (BIC) Using PyKalman

I'm trying to use pykalman to do a Kalman filter on financial data and it seems to be generally working very well. However, when I attempt to extend the code using BIC $\mathrm{BIC} = {-2 \cdot ...
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1answer
34 views

Data Projection in the Future

Suppose we have the following data: ...
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0answers
37 views

Sequential mutually exclusive signing-bonus offers (A variant on the Secretary Problem)

How much should you offer a potential hire in a signing bonus? Imagine you are interviewing a list of candidates for a particular job. Each candidate has a "lifetime value", and probability of ...
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1answer
74 views

Comparing interest rate and yearly stock return

I would like to compare the interest rate with the yearly return of a stock A and plot the 2 lines into 1 graph. The interest rate, which is also a yearly return, is on any given date determined by ...
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1answer
46 views

Modelling turnovers by a random walk. Is it right?

I need to analyse a bunch of weekly time series that reflect the turnovers of various companies. I already read that return rates or share prices show stochastic patterns that can be modelled by a ...
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1answer
202 views

ARCH + GARCH sum to more than 1. Dropping the intercept

I am capturing the daily percentage returns of a stock index with dummy variables. I do this both including and excluding the intercept. I get quite different results. If I keep the intercept (image ...
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1answer
17 views

I get a different result when I try and calculate the mean-variance formula of risky and riskless asset [closed]

I'm having trouble seeing how the expected return of a two asset portfolio, where the weight of the risk-free asset is positive, but the weight of the risky asset is negative, results in the final ...
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40 views

Distribution of daily log returns in Black-Scholes

We re in the Black-Scholes framework. So $(S_t)_{t \geq 0}, t \in \mathbb{N}$ (underlying) is a stochastic process on $(\Omega,\mathcal{F},\mathbb{P})$ with the filtration $(\mathcal{F}_{t})_{t \geq ...
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1answer
85 views

Standard Deviation in Transformation vs annualizing monthly returns?

I'm very confused about this difference, and I wanted to know the reason behind it (If this is very rudimentary, I'm sorry but I can't seem to wrap my head around it). If you were to transform a data ...