Stack Exchange Network

Stack Exchange network consists of 175 Q&A communities including Stack Overflow, the largest, most trusted online community for developers to learn, share their knowledge, and build their careers.

Visit Stack Exchange

Questions tagged [finance]

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

0
votes
0answers
24 views

LassoCV regression on price returns doesn' t work

I'm trying to use LassoCV to get a linear model for the log return of an asset price. So what I am doing is: Download historical prices for near 61 assets Calculates the log return and difference of ...
1
vote
0answers
21 views

Prediction of financial time series

I have several questions. I will split the text up in one high-level description of the goal of my exercise, a detailed description of my potential solution and finally my actual questions. Please ...
1
vote
0answers
26 views

Can I log-transform realized volatility in a co-integration setting

I'm writing my master's thesis and looking to see if there exists fractional co-integration between the volatility of some large stock-indices. My estimates of realized volatility are based on the ...
0
votes
0answers
24 views

What is the best way to combine “Price” and “Volume” in stock prediction?

I am trying to use LSTM network to predict stock prices. I know in real world there is a relation between the stock price and the trade volume. So I am looking a way to see if is it possible to ...
1
vote
0answers
22 views

Estimating and forecasting stock and option prices with GARCH models

I am new in the field of time series. I wonder why there is not enough literature about GARCH models used to predict stock or option prices? In other words, is it reasonable to use a general ...
0
votes
1answer
28 views

Calculating variance of process with time-varying variance

This is a question stemming off a previous post I had regarding calculating portfolio volatility. For a portfolio consisting of multiple assets, I understand that there are multiple ways to calculate ...
2
votes
1answer
34 views

Calculating portfolio volatility from portfolio returns vs. from covariance matrix

I'm having trouble understanding the difference in calculating portfolio volatility via the portfolio returns vs. via the covariance matrix. To be more specific: I understand that on the individual ...
0
votes
0answers
14 views

Different result in sensitivity analysis

the result of the sensitivity analysis when changing the below equation from using market value to book value as the measurement of leverage, Leverage = β0 + β1 PROF + β2 SIZE + β3 TANG + β4GROWTH +...
0
votes
0answers
26 views

CAPM Very Low R-squared Meaning

When running a CAPM on a portfolio I get a R-squared of 0.000964 which just seems impossible given the used portfolio, index and observed fit. What could be an error leading to such a result ? (I ...
0
votes
1answer
43 views

Detecting leading stocks using lag correlation

I am working on a project to find leading stocks in a stock market by using lag correlation. Say I want to compare 2 stocks, X and Y, and I have the time series of stock prices. Assume that the time ...
1
vote
0answers
57 views

Determination or AR and MA parameters

I have in my possession price and time of different trade from an auction. The price series isn't stationnary so I work with the log return series. I'd like to forecast the evolution of the log return ...
9
votes
2answers
283 views

Using ARMA-GARCH models to simulate foreign exchange prices

I've fitted an ARIMA(1,1,1)-GARCH(1,1) model to the time series of AUD/USD exchange rate log prices sampled at one-minute intervals over the course of several years, giving me over two million data ...
2
votes
0answers
21 views

Decomposition of interest rate risk premia

I have a question on econometric modelling techniques for decomposition. I have three variables: - V1 which is an indicator of an interest rate risk premia - V2 which is an indicator of a credit risk ...
0
votes
1answer
38 views

Identifying autocorrelation / serial correlation from graph?

I'm new to statistics and I'm currently working on some exercises to identify serial correlation visually. This is from a time series exercise of Dollar-Pound Exchange Rate. After running a simple ...
1
vote
0answers
24 views

How do unsupervised credit scoring models that don't consider historical financial data work?

There seems to be a number of startups (Zest Finance, Credolab etc.) that provide credit scoring schemes that rely exclusively on alternative data without considering users historical financial data ...
1
vote
0answers
15 views

Value at Risk with non-zero mean (RiskMetrics etc.)

RiskMetrics assumes zero mean for the calculation of value at risk (https://www.msci.com/documents/10199/5915b101-4206-4ba0-aee2-3449d5c7e95a) In our data, the mean return is quite negative. Is there ...
0
votes
0answers
16 views

Modelling CAPM with a time series dataset in Stata

I have a time series dataset and to model CAPM, I also need a risk free rate of return. I wanted to use the daily US 10-year bond yields as the risk-free rate. My data spans over 7 years. I have ...
0
votes
0answers
13 views

question about the logit model for credit risk

i have this question in one of the past exams . Discuss which model you would choose to calculate the probability of default of corporate firms and give a rationale for including OR excluding the RE/...
0
votes
0answers
29 views

Value at Risk VaR with monthly return

The picture below shows the problem. I have tried to solve in this way: 0,001*1,88+2400*0,002 by following a formula in theory slides. But obviously there is a problem in that. Could someone help me ? ...
0
votes
0answers
89 views

Neural Network for the Famous Black-Scholes Equation (1972)

The price of an option (in finance) is given by the famous Black-Scholes equation. I would like to design a neural network to predict the price of an option. Basically the inputs are the attributes of ...
0
votes
0answers
13 views

Data structure for share capital increase

I have the following dataset for share capital increases for the 2010-2017 period: ...
1
vote
0answers
31 views

Unit root test with a dummy for an event

I'm currently working with financial time series that experience a crash towards the middle of the series. These series are returns. From the graph, these series clearly look stationary. However, due ...
1
vote
1answer
37 views

Sample from aggregate portfolio distribution versus individual asset distributions

Suppose I have three assets $x_1,x_2,x_3$ in a portfolio with weights $W=\begin{bmatrix} w_1 \\ w_2 \\ w_3 \end{bmatrix} $, expected returns $R=\begin{bmatrix} \mu_1 \\ \mu_2 \\ \mu_3 \end{bmatrix}$, ...
0
votes
0answers
52 views

Test for confounding variable S&P 500 Python

I'm looking into a possible topic for a school project currently. It involves looking at the S&P 500 in comparison to other indices globally (e.g., Nikkei, DAX, etc.). I currently have plotted 19 ...
1
vote
0answers
74 views

Unit root in time series of log return of s&p 500. What to do? [closed]

I have 9500 closing prices of s&p500. I took daily return of the prices dailyreturn and then log return of the prices logreturn=log(1+dailyreturn). Now I checked the data using augmented Dickey-...
1
vote
1answer
61 views

Lag between forecast and actual value without lagged dependent variable as features

I'm trying to predict a time series using a model-tree (Cubist) and I'm getting a strange behavior, I think. This is a stock market data but I'm not using the raw level of the stock price but change ...
3
votes
0answers
102 views

Noise in ARIMA Model In-Sample Predictions

I am working on fitting some financial data into an ARIMA model to give me a forecast of the next time period. I am using pyramid's auto_arima function to get a ...
0
votes
1answer
92 views

Algorithm to find the attributes that comprise the greatest concentration

I have a porfolio of mortgage loans where each loan has a number of attributes attr1, attr2, .., attrN. I would like to analyze the portfolio credit risk concentration (see below) using these ...
3
votes
1answer
136 views

How to minimize sharpe ratio with LSTM recurrent neural network?

I've read some articles about trading using recurrent reinforcement learning such as this one. The point where I do not fully understand is how to construct the cost/loss function. In the article, ...
0
votes
0answers
17 views

First moments of GBM-like process with non-normal shocks

First consider a standard GBM process of the form, $$\frac{dS_t}{S_t} = \mu dt+ \sigma dW_t$$ but instead of the normal $W_t \sim N(0,1)$ , instead we have that $W_t \sim EMG^-(0,1,\lambda)$. Where ...
1
vote
0answers
11 views

Testing for difference in means for utility of wealth

Assume you have 2 different investment strategies, A and B. You simulate how A and B perform on the same $N$ time series of returns and compute the resulting utility of wealth. $N$ is large, say ...
0
votes
0answers
53 views

Machine learning techniques to evaluate hedge funds

I have a data set which consists of > 500 hedge funds, their historical monthly returns, and their benchmark (index) monthly returns. The number of data points (# of monthly returns) differs from a ...
0
votes
1answer
34 views

Measuring correlation between random variables when they are not normally distributed?

I want to perform some analysis on portfolio that consists of stocks. In particular, I want to know the relationship between the stocks during the downmarket. The problem complicating this analysis ...
0
votes
1answer
89 views

Is Reinforcement Learning suitable for optimal control problems in which actions influence rewards but not states?

In particular, rewards $r = f(s, a, s')$, but states are independent of actions $s' = g(s)$. A example could be asset trading that actions (long, short, hold) of a small trader won't affect market ...
0
votes
0answers
54 views

Expectation of Maximum Value

I'm trying to understand the basic statistics involved in trading. Suppose I'm trying to decide whether to buy a stock whose current price is $V_0$. Suppose I have some fancy statistical model from ...
1
vote
0answers
65 views

ARMA-GARCH model with t-distributed errors

I've estimated an ARMA(1,2)-GARCH(1,1) model fitted on financial data. It is very satisfactory in modeling the autocorrelation and the volatility in my data, however, the qq-plot empirical quantiles ...
0
votes
0answers
27 views

Cointegration vs high cross-correlation in pairs trading

My econometrics professor once said that “trading two cointegrated series is a profoundly different thing than trading two highly correlated series”. What was he referring to and what are the ...
1
vote
0answers
71 views

Machine Learning on Extremely Low Signal Data

I have terabytes of data with an extremely low signal to noise ratio, with the following characteristics: The relationship between the features and the response variable can change over time I'm ...
3
votes
0answers
49 views

Parameters in Autoregressive representation of an ARCH model

Suppose we have a $0$ mean time serie representing stock index returns about a title, $r$. I also know it follows an $ARCH(p)$ model with parameters $\omega$ and $\alpha$, specified in the following ...
1
vote
0answers
23 views

What are good ways to visualize budget/financial controlling data?

What are useful visualizations of budget/forecast vs actual spending data, i.e. data consisting of hierarchically structured sums compared at various (2-4) points in time? The aim would be to make ...
1
vote
0answers
19 views

PCA factor loading implementation [closed]

Say I get the following PCA results: Pc1 pc2 A 3.5 3.5 B 3.7 3.6 C.2.5 4.5 I would like to know what is x and y such that xA + yC = B. How should I ...
2
votes
1answer
84 views

Impact of window size on estimated volatility using SMA or EWMA

When calculating volatility (either using an SMA or EWMA approach), what impact does the window size have on the volatility estimate?
0
votes
0answers
34 views

Linear regression in R: testing statistical significance with t-tests

I am trying to test the statistical significance of the alphas in my trading strategy. However, I do not understand the difference between the alphas generated in R. To test the statistical ...
0
votes
0answers
44 views

Financial time series, GARCH (1,1) parameters estimation with QMLE, Generalized error distribution (GED)

Good day all, I am using a GARCH (1,1) model for financial time series. More precisely, 04 jan 2010 to 08 dec 2015 of EURUSD daily close log return data. The data distribution is clearly not normal ...
0
votes
0answers
33 views

Constrained optimization - quantitative finance

I am trying to perform constrained opmitization for portfolio performance attribution analysis. Specifically, I am trying to determine the impact of sectors performance on the S&P 500 index. Min ...
0
votes
0answers
31 views

Computing expected loss

I have three options like $A_{1}\leq A_{2}\leq A_{3}$. If I choose the higher value $A_{3}$ , I have more risk to loose. Let me make it clear , if I choose first the expected loss will be 1 , for the ...
2
votes
0answers
40 views

Why financial time series have perfect multicollinearity?

I have daily financial time series of stock returns (35 stocks) which I took the natural logarithm and subtracted the risk-free rate. However, I get the issue non-invertibility of the covariance ...
0
votes
0answers
30 views

Estimating EVT for non-i.i.d. data

I have a pnl time series (length more than 10 years) of a large diversified financial portfolio. on which i am trying to estimate VaR based on the method described in the paper : "Estimation of Tail-...
0
votes
3answers
38 views

Trying to run a regression on three variables that impact equity returns

I have three variables a,b and c, which impact equity returns, y. a is based on financial statements, so it is a quarterly figure. b and c are calculated daily, and so are daily (only on trading ...
1
vote
2answers
111 views

Nonlinear regressor in GLM link function

Try to reproduce Robert E. McCulloch and Ruey S. Tsay’s paper Nonlinearity in High-Frequency Financial Data and Hierarchical Models with local market data. the paper uses GLM to model high-frequency ...