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

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9 views

How to use Stata Stockquote obs by obs (different tickers and dates) [on hold]

We want to get stata date from yahoo finance for many firms (tickers) and for different dates (time spans). In short: this command should work obs by obs and should replace all variable names by the ...
1
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0answers
19 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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0answers
18 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 ...
3
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1answer
63 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
22 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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0answers
23 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 ...
2
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0answers
18 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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0answers
44 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
32 views

Data Projection in the Future

Suppose we have the following data: ...
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0answers
23 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
43 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 ...
0
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1answer
28 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 ...
1
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1answer
49 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
10 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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0answers
13 views

Aggregating Equity Intraday Ticks

I am currently working with intraday equity data. The ticks are sourced from Bloomberg API. Bloomberg only timestamps down to the second (not millisecond) and data is not in order. In many instances ...
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0answers
8 views

Comparing two samples of volatility data: Some complication

I'm having some problems establishing the best possible test for a comparison of two samples. Background: I'm investigating the volatility in returns of Exchange Traded Funds which trade ...
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0answers
37 views

What is Tau and Omega in the Black Litterman model?

I'm looking into the BL model when it comes to portfolio optimization, and I'm having a hard time trying to understand each one. I've read on several papers that Omega is the covariance matrix, but I ...
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0answers
24 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
34 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 ...
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1answer
74 views

Comparison of Two Time Series (Strategies) - Are they different?

Apologies for my naivety if the answer to the question is simple, stats is an area I am not comfortable in and am looking to improve. My problem is within the frame of finance. Simply put, say I ...
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1answer
98 views

Mortgage loan predictive analysis

I have hundreds of thousands of mortgage loan historic records that look like these 2 examples: ...
2
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1answer
279 views

use ARIMA models to predict stock prices

Are there any books or compilation of research papers that discuss application of ARIMA models to forecast prices in financial markets I.e stocks,commodities,futures,options etc. I found this one but ...
2
votes
1answer
89 views

Applying the Bayesian Information Criterion for Stepwise Selection Algorithms on Time Series

The title sounds rather complicated for fairly simple statistics issue. I've created a factor model that tests adding additional factors by checking if the improvement in the mean squared error ...
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2answers
303 views

The econometrics of a Bayesian approach to event study methodology

Event studies are widespread in economics and finance to determine the effect of an event on a stock price, but they are almost always based on frequentist reasoning. An OLS regression -- over a ...
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0answers
90 views

Log returns and ARMA-GARCH models

I try to model currency rates volatility using GARCH models through the RUGARCH package in R. Starting from the observed currency rate series, I compute the log-return through: ...
3
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2answers
563 views

Difference between geometric and arithmetic mean

I still have problems to exactly understand the difference between geometric and arithmetic mean. I know that e.g. for returns, the arithmetic mean can be wrong (e.g. if I start with 100 $ and if my ...
5
votes
1answer
662 views

Why stock prices are lognormal but stock returns are normal

Except for the fact that returns can be -ve while prices must be +ve, is there any other reason behind modelling stock prices as a log normal distribution but modelling stock returns as a normal ...
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0answers
33 views

How could I calculate value at risk by simulation from garch model?

I need to calculate value at risk for return of mutual fund by using simulation monte carlo for model garch ...my data have 139 observations and its not normally distribution ...what are the steps to ...
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0answers
10 views

Cumulative returns when client loses nearly everything

I'm trying to calculate the cumulative return of a client over a period. During that period the client may choose to make deposits. This is where I am getting stuck. I am using the Modified Dietz ...
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0answers
9 views

Optimal intertemporal allocation of bets based on estimated returns

Each day, an investor predicts the day's stock-market return in the morning, generating a point estimate and prediction interval, and chooses to bet an amount $B_t$ on the market that day based on her ...
0
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1answer
59 views

What is the dummy variable in the Henriksson-Merton model for market timing ability?

I am a little confused about calculating the dummy variable on the Henriksson-Merton model for market timing ability. Some researches used 1 if the excess return for market is negative but other ...
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1answer
14 views

How to assign a value to an item with no fixed price that is sold alone or in combination?

Let's say we have a set of items with no fixed price, and a set of transactions in which these items are sold alone or in combination. How do I go about assigning a value to each of these items? ...
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0answers
40 views

Clustering methods for decision trees

My thesis work examines e-commerce data that is clustered using a decision tree, but I am uncertain about where to start. What algorithm or methods does one use to do this?
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2answers
91 views

What is the purpose of Leads and Lags in a time series?

I will analyse stock prices and i don't understand the purpose of leading and lagging. can you please suggest me some preliminary analysis on the stock prices also, this will help me for my thesis.. ...
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20 views

How can I validate if a pattern is meaningful?

I am a financial analyst for a construction company. My goal is to develop an accurate sales model that is correctly reflects prior sales history (back testing) so I can then predict future sales. I ...
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0answers
29 views

Unknown formula [closed]

I came across a formula presented in a financial context, and have been trying unsuccessfully to try a work out what it means. $SL = 2 * 100 * \sqrt{V_L + (\alpha + \beta)^k \sigma^2_{n - V_L}}$. I ...
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0answers
50 views

Predicting stock returns - in a panel data specification or by using portfolio formation strategies?

I'm working on an empirical analysis where I try to predict stock returns using weekly data. Ideally, I would like to use a panel data model like the following: $$ ...
3
votes
1answer
53 views

Credit Risk and Concentration

I am working with a UK credit-union and we are looking to build a model to assess our credit risk and changes to this over time. We have a number of loans to borrowers who each have a credit rating ...
4
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2answers
129 views

How to stationarize profit and loss data with an increasing variance and large negative values for time series analysis?

PnL can take large negative values, and its variance increases over time as the firm grows. If we do differencing, an increasing variance remains. If we take log, negative values cannot be defined. ...
1
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1answer
279 views

Autoregressive distributed lag models ADL(p,q) determining amount of lags

I would like to know how I can determine the appropriate amount of lags in Matlab or another statistical package. I'm getting confused with VAR models and ARMAX models all the time and I'm a little ...
3
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3answers
236 views

Why it is good to take log on Finance data? Does it have nice properties? [duplicate]

Just like what I am asking in the title. I see nearly all the financial datas take logs before the data analysing step, Why? Dose it have nice properties?
2
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0answers
51 views

Monte Carlo simulation of investment account

I'm trying to estimate performance of an investment account over 20 years. The question is, have I set up the Monte Carlo simulation correctly? I've used Excel. I've assumed 8% average return and 13% ...
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0answers
77 views

Predicting whether a potential sale will be won or lost

I am currently working on a project using a sales system and trying to come up with a way to use the current pipeline of potential sales to predict the amount of product that will be sold in the ...
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0answers
153 views

How to convert daily variances to a monthly volatility and then annualize it?

I work out the conditional variance using a GARCH model based on daily returns as follows: ...
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0answers
30 views

Is there a statistical technique to perform this comparison? How could I do this on Stata?

I've been busy on a work where I have to compare two financial econometrics models on the determinants of financial leverage (panel data). These have only few control variables and the dependent ...
0
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1answer
70 views

Comparing salaries in different countries

I have a number of salary figures for roles that I want to compare across various countries. Obviously each country has their own currency and living costs. A simple way of comparing would be to use ...
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0answers
17 views

How to restore market making algorithm?

I need your advice to know how to restore certain market maker algorithm based on historical data. I have dataset with limit order book information at discrete time periods. For every time moment it ...
0
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1answer
108 views

Sum of weights in portfolio theory is not equal to 1

I'm trying to understand basic portfolio theory using R. As far as I understood, the sum of the weights of assets must be equal to 1 . But in this link, that teaches how to compute the efficient ...
1
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0answers
85 views

How do I deal with asynchronous data in financial time series?

I have tick by tick data of two financial time series. I am trying to do online regression between the given two time series. But I am stuck due to asynchronic nature of given financial time series ...
2
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0answers
37 views

Analysis of proportions over time

My knowledge of statistics is limited and I am looking for resources to read on the matter if possible. Anyways, I am currently trying to estimate a confidence interval for a proportion over time. ...