Shares of stock traded in a stock market. Equities represent the residual claim or interest of the most junior class of investors in assets, after all liabilities are paid.
29
votes
5answers
1k views
Lévy alpha-stable distribution and modelling of stock prices.
Since Mandelbrot, Fama and others have performed seminal work on the topic, it has been suspected that stock price fluctuations can be more appropriately modeled using Lévy alpha-stable distrbutions ...
17
votes
7answers
1k views
How to design a custom equity backtester?
I was thinking about writing my own backtester and I realize I have to make some assumptions. So I was hoping I could post what I am planning on doing and hopefully some of you can give me some ideas ...
17
votes
6answers
901 views
Why do some anomalies persist while others fade away?
In their 1990 book, A Non-Random Walk Down Wall Street, Andrew Lo and Craig MacKinlay document a number of persistent predictable patterns in stock prices. One of these "anomalies" is variously known ...
16
votes
4answers
2k views
Any research on how natural language processing can be used to forecast stocks?
Is there any published research of decent quality linking news or unstructured information to asset returns? I know that Thomson Reuters offers its Machine Readable news (MRN), so somebody must use ...
14
votes
7answers
4k views
Any known bugs with Yahoo Finance adjusted close data ?
Yahoo Finance allows you to download tables of their daily historical stock price data.
The data includes an adjusted closing price that I thought I might use to calculate daily log returns as a ...
13
votes
5answers
2k views
Is the stock price process a martingale or a Markov process?
Some people claim that the data-generating process for stocks is a "martingale" and that is has the "Markov property".
Are they unrelated? Is it that the Markov property implies some sort of ...
13
votes
2answers
569 views
How do you distinguish “significant” moves from noise?
How do you distinguish between losses that are within the normal range for day-to-day shifts and situations with a real potential for loss? The specific application I have in mind is pattern ...
12
votes
3answers
2k views
What are the best sources for equity quantitative research?
What are the best sources of quantitative finance research in equities?
I will list a couple and note an asterisk if the research is available by request (i.e. non-clients) or online:
BAC-Merrill ...
11
votes
4answers
3k views
data on historical stock price of bankrupt companies
does anybody know a site where I can download historical data on stocks including companies that have gone bankrupt such as lehman brothers?
it appears that bankrupt companies no longer appear in the ...
11
votes
3answers
1k views
Free intra-day equity data source
Are there any free data source for historical US equity data? Yahoo finance has daily prices but I'm looking for something more granular and goes back 2 or more years (doesn't have to be close to tick ...
10
votes
3answers
1k views
Hedging stocks with VIX futures
It seems that VIX futures could be a great hedge for a long-only stock portfolio since they rise when stocks fall. But how many VIX futures should I buy to hedge my portfolio, and which futures ...
10
votes
2answers
562 views
Missing step in stock price movement equations
Assuming a naive stochastic process for modelling movements in stock prices we have:
$dS = \mu S dt + \sigma S \sqrt{dt}$
where S = Stock Price, t = time, mu is a drift constant and sigma is a ...
10
votes
2answers
593 views
How to forecast expected volatility from high-frequency equity panel data?
I'm wading through the vast sea of literature on realized volatility estimation and expected volatility forecasting (see, e.g. Realized Volatility by Andersen and Benzoni, which cites 120 other ...
10
votes
1answer
214 views
How do you characterize dividends for equity options?
While many systems like to treat dividends as a continuous yield when pricing equity options, it works quite poorly for short-dated options.
In the short run, deterministic dividends are clearly the ...
9
votes
3answers
801 views
How to cluster stocks and construct an affinity matrix?
My goal is to find clusters of stocks. The "affinity" matrix will define the "closeness" of points. This article gives a bit more background. The ultimate purpose is to investigate the "cohesion" ...
9
votes
2answers
1k views
How can I learn about the quantitative aspects of market making in illiquid single stock options?
I would like to learn more about the possible ways of doing quantitative research regarding option market making. In particular, while the mainstream index option market may be very liquid, the ...
9
votes
3answers
815 views
How to solve for the implied stock lending rate given equity options prices?
When market makers price options on hard-to-borrow equities, they include the cost to borrow the underlying equity that their broker is going to charge them to sell the security short to hedge. I'm ...
9
votes
2answers
357 views
How to determine if one player moved a price
I'm trying to understand what caused certain price movements (aren't we all!) in per-minute data for major NYSE stocks. In particular, I'd like to determine whether a given price movement of X% in ...
9
votes
2answers
1k views
How to get list of all CUSIPS/ISIN?
I want a list of all CUSIPs/ISINs. It would be nice if they were also categorized (e.g. Bonds/Funds etc). Where can I get such a data?
9
votes
1answer
343 views
How to estimate the covariance of an index with a basket of stocks?
What would be an ideal way to estimate the covariance of an index with a basket of stocks? For example, should I use one-tail ANOVA test or an individual stock & index F-test?
9
votes
1answer
253 views
Currency Hedged ETFs
At work we were talking about currency hedging our equity index exposures but I am struggling to understand how this happens in a typical iShares ETF.
If we take the Japan ETF IJPN then we see this ...
8
votes
1answer
334 views
Any research paper on stop loss?
Has there been any rigorous study on stop loss ? When to apply it?
Has it been shown to work through proper statistical backtests?
I am interested in Equities, preferably European stocks.
8
votes
4answers
370 views
Position management in presence of continuous forecast
Let's say we have an equity liquidity-providing model that was fitted on 1 minute bar periods. The model forecasts the 1-min next period return given the activity of the previous bars. Now, when we ...
8
votes
2answers
493 views
When should you build your own equity risk model?
Commercial risk models (e.g., Barra, Axioma, Barclays, Northfield) have evolved to a very high level of sophistication. However, all of these models attempt to solve a very broad set of problems. ...
8
votes
1answer
537 views
Forward Adjusting Stock Prices?
How should one correctly forward adjust historical prices given a time series of Open, High, Low, Close, Return?
Suppose that the data series is given below ('1' is the oldest interval; '5' is the ...
8
votes
2answers
493 views
Why do low standard deviation stocks tend to have superior future returns?
I've recently stumbled on something that really surprised me. These papers (1, 2) find that past standard deviation of returns is inversely related to future returns. That is, portfolio of low ...
7
votes
1answer
431 views
What methods do I need to learn in order forecast asset price movements?
What are the standard models used to forecast asset price movements? For example, if I were to trade an option, what model would I use in conjunction with option pricing models to forecast the stock ...
7
votes
2answers
420 views
What is a reasonable upper bound on the performance of a daily trading strategy?
I am backtesting an equity trading strategy which trades only once per day. Is there a general rule of thumb for the reasonable upper bound on the rate of return of such a strategy? For example, a ...
7
votes
2answers
1k views
How we can forecast stock prices using chaos theory?
I saw an article in which the writer had mentioned that he used chaos theory to predict stock prices and ended up with a profit over 30%. Chaos theory is basically about finding patterns called ...
7
votes
1answer
177 views
Alternative liquidity measures
I'm going to write the MSc thesis on flight-to-liquidity phenomenon in stock markets and I'm interested in liquidity measures other than Amihud or bid-ask spread.
What are some other popular measures ...
7
votes
3answers
283 views
How to improve the consistency of explained variance statistics in a linear equity model?
I have an intraday equity returns linear model that, overall, shows good values in terms of $R^2$, p-value and other explained variance statistics. Around 70% of the stocks show consistent R-squared ...
6
votes
3answers
373 views
How to account for jumps in intraday data when calculating beta?
I am calculating betas on intraday trade data at 15-minute intervals. For simplicity sake, let's assume I am modeling
\begin{equation}
Y = \beta * X + c
\end{equation}
where $Y$ is the return of XLF ...
6
votes
3answers
277 views
Scanning a stock database for errors/flaws
I'm currently working on some matlab code that is supposed to check a stock database for any errors (missing values, wrong values, etc.). The reason for this is that after reading this post I came to ...
6
votes
2answers
257 views
What close price to assume for thinly traded stocks?
If a thinly traded stock has not traded for the last few days (volume=0), is it better to use the last known trade price (i.e. roll over last non-missing trade price) or use last known ...
6
votes
2answers
171 views
How well does CAPM beta track the risk of a particular market relative to world markets?
Can the CAPM beta of emerging markets be less than the beta of the developed markets?
As part of my research, I run regressions using market indices. I estimate the beta using a regression of MSCI ...
6
votes
1answer
1k views
How do I reproduce the cross-sectional regression in “Intraday Patterns in the Cross-section of Stock Returns”?
Recently I was trying to reproduce the results of "Intraday Patterns in the Cross-section of Stock Returns". The authors used cross-sectional regression to determine which intraday lags have ...
6
votes
3answers
484 views
How to calculate compound returns of leveraged ETFs?
Forewarning: this is a complete newbie question :-)
I am starting to learn about ETFs by trying to do the numbers. When learning about the compounding effect in leveraged ETFs, I wanted to simulate ...
6
votes
1answer
263 views
Which valuation measures are most useful for equity market timing?
Competing academic studies, such as Asness's Fight the Fed Model and Lee, Myers, and Swaminathan's What is the Intrinsic Value of the Dow, offer differing answers to the question of whether equity ...
6
votes
1answer
189 views
How to assign equity analyst recommendations to a common, numeric scale?
Yahoo finance conveniently provides historic ratings from a number of analysts. Unfortunately, each analyst seems to use a different scale: buy/hold/sell, perform/outperform/neutral, overweight/equal ...
6
votes
1answer
402 views
How to use binomial tree for portfolio of equity products
How can I use a binomial tree to price a European option that's based on a portfolio of equity products? I have volatility and correlation matrix of all underlying products?
Looking for a formula ...
6
votes
3answers
288 views
What is an acceptable error on implied volatility?
Given an implied volatility surface (on equity indexes) and a calibrated model, what is the range of error on implied volatility a trader would accept ?
This obviously depends on the model used to ...
6
votes
1answer
132 views
Estimate price movement per unit of volume for daily data
I'm working on backtesting a number of stock trading strategies and need to estimate how much the execution price will likely deviate from the historical close price for that asset using daily data; ...
6
votes
1answer
276 views
NASDAQ TotalView ITCH order reference number number characteristics
I am building a custom hash implementation for storing NASDAQ ITCH order messages. Obviously this is keyed on the order reference number and I am wondering if these numbers are sequential, random or ...
5
votes
4answers
732 views
Do low volatility stocks outperform high volatility stocks over the long run?
A recent article from Forbes seems to indicate that low volatility stocks outperform high volatility stocks over the long run. Does anyone have any supporting or contradicting evidence to this claim? ...
5
votes
4answers
643 views
How to compute momentum from equity time series?
Let's say I have time series of stock prices for many stocks. What's the best way to sort the stocks based on which have been going up/stayed the same relative to others? Can this be done with a ...
5
votes
2answers
826 views
Is equity market making a game of speed?
I have always felt that equity market making was a speed game for HFTs. But recently I talked to someone on the buy side, who made a claim to the contrary. He argued that with the right market making ...
5
votes
1answer
191 views
How are dual class shares different from non dual class shares from a market makers' perspective?
Assume a stock Foo with a single share class.
Furthermore, assume a dual class stock Bar with classes I and II with different voting rights.
The shares in the different classes have equal cash flow ...
5
votes
1answer
123 views
looking for regulations regarding stock symbol reuse in the US
in june 2009, GM has filed for bankruptcy. trading has moved from NYSE to OTC pink sheets, and the symbol changed to GMGMQ and later to MTLQQ. in november 2010 a new GM symbol started trading on NYSE. ...
5
votes
2answers
126 views
Economic contagion to individual stocks (ideas for analysis)
I'm doing my undergraduate thesis on firm-level contagion. Specifically I look at a measure of performance over a financial crisis (e.g. raw stock returns), then run cross-sectional regressions with ...
5
votes
0answers
114 views
Testing for stock market herding over short periods
The literature has well established methods for testing stock market herding over a decent time window.
Are there any ways that have appeared in the literature to test for stock market herding over ...
