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.

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2
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1answer
144 views

How to compare different volatility measures?

I read the Euan Sinclair's book (Volatility trading) in which he suggests different volatility estimators (Close-to-close, Parkinson, Garman-Klass, ...). I am inquiring about what is the best stock ...
2
votes
2answers
158 views

Pricing forward contract on a stock

Please tell me where I've gone wrong (if I did in fact make a mistake). I'm pricing a long forward on a stock. The usual setup applies: This has payoff $S(T) - K$ at time $T$. We are at $t$ now. ...
0
votes
0answers
54 views

How to determine the equiy interest of target company if there is circular ownership?

I would like to ask is there any way to determine the equity interest of target company if there is circular ownership. For example, suppose company A owns 50% of company B, company B owns 100% of ...
0
votes
0answers
241 views

Backtesting with fundamentals

Recently I've read some books about quantative approach to fundamental investing: - What works on Wall Street - James O'Shaughnessy - Quantitative Value - Wesley Gray, Tobias Carlisle - Quantitative ...
1
vote
2answers
283 views

How to incorporate fundamental analysis in quantitative trading algorithm? [closed]

I want to write a quantitative stock trading program based on fundamental analysis. It would crunch through prices, financial reports to look for value stocks. It can support backtesting of strategy ...
2
votes
2answers
373 views

An alternative to the Gaussian distribution to describe/fit market stock returns

After the financial crisis in 2008, many people (including me) don't really believe that stock returns can be described in terms of the normal distribution (Gaussian distribution). But besides the ...
1
vote
0answers
101 views

The Public Market Equivalent measure in private equity

What are the advantages and disadvantages of the Public Market Equivalent measure in private equity? Why is it that the volatility of the cash flows do not matter? This topic has been discussed in a ...
2
votes
1answer
103 views

Best practice approach for calculating the PE-ratio

I am trying to calculate the historical PE ratios of a stock, but which date should I use to get the stock price in calculating the PE ratio? My current approach is to use the stock price of a day ...
3
votes
0answers
171 views

How are quants able to verify whether their calculated prices are any good

This question is related to the discussion on Model Validation Criteria However it appeard to be very high level to me and I would like to go more into detail. Not working at a pricing desk the ...
6
votes
2answers
8k views

How to simulate stock prices with a Geometric Brownian Motion?

I want to simulate stock price paths with different stochastic processes. I started with the famous geometric brownian motion. I simulated the values with the following formula: ...
1
vote
3answers
489 views

Data sources for financials of global equities

I looked through the master list of data sources but could not find any data sources for financial data of global equities. An example would be the balance sheet of, say, ...
5
votes
2answers
537 views

What are the econometric assumptions in the Fama-Macbeth procedure (1973)?

Fama-Macbeth (1973) introduce a two stage cross-sectional regression method (http://en.wikipedia.org/wiki/Fama%E2%80%93MacBeth_regression). 1) If I was to regress stock prices (or returns) on a ...
0
votes
0answers
56 views

Data vendor providing end of day equity data for private use including US and main European countries

I'm looking for a data vendor with reliable data (and affordable price) that provides end of day data for at least US, german, french, italian and spanish equities. The data export should be automated ...
0
votes
1answer
113 views

Calculating the Sum of Squared Deviations between two Normalized Price Series

How can I calculate the sum of square deviations between two normalized price series according to (Gatev et. co 2006)? My normalized price series of stocks $X$ and $Y$ consist of the cumulative total ...
18
votes
8answers
6k 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 ...
6
votes
3answers
5k views

Why does the adjusted closing price take into account dividends?

I'm trying to get an intuition as to why the adjusted closing price includes a dividend adjustment: \begin{equation} 1 - \frac{dividend}{close} \end{equation} I understand why the adjusted closing ...
-1
votes
1answer
122 views

Calculate the total returns from the total return index [closed]

I have the Total Return Index(RI) for several companies. I know that I can calculate the log retunrs with $ln(RI_t/RI_{t-1})$. Therefore my first guess would be to ...
1
vote
0answers
391 views

How to estimate market integration parameter in Singer-Terhaar model for E(r)?

Singer-Terhaar is part of CFA II and III curriculum. It estimates risk premium for some asset, traded at some local market, as weighted average of expected premiums for the case of (1) local market, ...
2
votes
0answers
188 views

How to properly take averages to reduce data in regression/panel data analysis

I'm trying to do a regression on my panel data. Say I have T=3500 days of data and N=125 firms. Since Matlab get's major memory issues (which I try to prevent by the usual solutions as seen on the ...
2
votes
1answer
169 views

Risk-neutral models for rights issues

A rights issue is the granting by a corporation to its shareholders of a right to purchase $N$ new shares for each $M$ shares they already hold at a (often discounted) price $K$. Thus, it ...
0
votes
0answers
36 views

Better formula than midpoint? [duplicate]

For fair market value one formula is to take midpoint of bid and ask. Is there a better formula that weights the bid size and ask size ? For example if stock A is trading at bid size 2000 at 10.10, ...
0
votes
0answers
70 views

UAC- Unbiased Average Correlation for a Matrix of stocks

Once I have computed a correlation matrix for a portfolio of stocks, how do I calculate the UAC for the correlation matrix? ie, how do I strip out any auto correlation among the names?
0
votes
1answer
321 views

converting US tickers into Reuters RIC [duplicate]

I have a large list of US equity tickers such as: "GIRO", "ITUB", "BITA" etc and I would like to convert them into their corresponding RIC codes. Do you know how can I do it? I have access to ...
0
votes
1answer
323 views

Non-intuitive correlation between S&P sector indexes and economic indicators

I am trying to understand how changes in economic indicators like Unemployment Rate, Inflation Rate, and Consumer Sentiment affect the portfolio values. For that I want to measure the correlation ...
15
votes
3answers
2k views

Machine Learning vs Regression and/or Why still use the latter?

I come from a different field (Machine learning/AI/data science), but aim to ask a philosophical question with the utmost respect: Why do quantitative financial analysts (analysts/traders/etc.) prefer ...
7
votes
1answer
407 views

Price functions based on order book events

Assume some equity traded on a given exchange based on an electronic limit open-order book $B$ that makes sequential updates as a function of time $t$. What are "natural" or common price functions $P: ...
2
votes
3answers
416 views

Time Series or Regression

I'd like to research the impact of certain events and characteristics on the liquidity of the stocks over time. I've got a sample of 200 stocks and I use several measures of liquidity (Amihud, Bid-Ask ...
5
votes
3answers
1k 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 ...
0
votes
1answer
327 views

backtesting with open, close, high and low

I am quite notice at the business of backtesting for an automated strategy. I was wondering, can I/should I use High and Low for this purpose? On one hand, the algorithm will see these prices, but on ...
0
votes
1answer
171 views

adjusted close prices on SP500

When I look at the adjusted close prices of SP500, for example, I notice that the numbers are always significantly below the actual closing. In the explanation of what adjusted prices are, one gets ...
1
vote
0answers
154 views

Forecasting Equity returns using state-space models

I have data for 3 yrs of 5 min prices of various equities. I can construct a linear regression model and try to see the in-sample model performance. But I was wondering whether fitting a state-space ...
3
votes
2answers
173 views

Fundamental reasons for the stock price change

Let us start from the old times, where markets were less liquid. Suppose I hold some stocks of the company XYZ and I want to sell them. Why shall I expect that their price can rise in the next quarter ...
-1
votes
1answer
239 views

Where can I get real-time equity options quotes for a reasonable price (i am not a company) besides screen scrapping Yahoo! Finance? [duplicate]

Want to have electronic access to equity options quotes in real-time. Is there anyone offering this service to the individual investor for a reasonable price? Again it must be electronic, in other ...
3
votes
0answers
389 views

Testing Valuation, Size and Momentum (proprietary factors) from 1988-2013: No evidence of driving cross-sectional returns

I am currently testing whether three proprietary factors - Valuation, Size and Momentum - explain cross-sectional returns. A sample of 3000 securities was tested using Fama-MacBeth two-pass ...
-2
votes
2answers
367 views

How to get/estimate ask/bid price for backtesting for OHLC data? [closed]

As you know, most of the EOD data available have only OHLC price. I used to do back-testing using the Close price as both bid and ask. however, in real world, the bid and ask spread is huge and the ...
0
votes
0answers
69 views

Real value of small numbers of shares of company stock

What is the real value of a single share of company stock? Let's ignore the "the value is what someone is willing to pay for it" angle. At some point, there has to be a real inherent value to ...
4
votes
1answer
161 views

Statistical Power and Active Management

I was reading an article recently that pointed out the dangers of using statistical inference in evaluating active managers as the power of statistical tests diminishes with the variance of the ...
-2
votes
1answer
251 views

Order book depth views preferences: order-by-order vs. total aggregated volume by price levels

Which is best? Or is it irrelevant? Hi! Considering Level 2 Data (Market Depth), I want to understand the advantages to have all the order book on an order-by-order basis (or tick-by-tick basis) ...
-4
votes
1answer
205 views

What is (High-Low) and (Open-Close) spread? [closed]

Spread is the difference between Bid and Ask. I'm confused what is High-Low Spread and Open-Close spread?
0
votes
0answers
239 views

Fluid dynamics for order book depth modelling

Would someone be able to give me an idea what type of fluid dynamics I could look at for modelling the order book? My background is more signals-related maths (correlation, covariance, fourier etc). ...
1
vote
0answers
83 views

Insignificant or significant explanatory power over risk adjusted returns?

Currently iam working on my master thesis which is about risk adjusted returns in the Asia Pacific REIT market. The goal of the paper is to determine/find variables that conceive explanatory power ...
4
votes
0answers
123 views

ERP and FF 3-factor model

In a more conservative estimate than a simple historical average, Fama & French estimate (US) equity risk premium at 3-4% (e.g., Equity Risk Premium, JF, 2002). This suggests that in an APT-like ...
0
votes
2answers
208 views

Change option B&S pricing

Consider a market composed by two stocks whose prices $X$ and $Y$ are given by B&S diffusion $$dX_t= \mu X_t dt+ \sigma X_tdW_t$$ $$dY_t= \mu Y_t dt+ \sigma Y_tdB_t$$ Supposing the market is ...
0
votes
0answers
75 views

Can the equity premium puzzle be explained by volatility-induced financial growth?

Citing the paper Volatility-induced financial growth (2007) by Dempster et al.: when asset returns are stationary ergodic, their volatility, together with any fixed-mix trading strategy, generates a ...
3
votes
1answer
130 views

At what volume would you move the price at the opening auction?

At many exchanges the opening price is set using an auction which takes place pre-opening (see here for example). During the auction you are allowed to place orders according to certain rules (you ...
0
votes
1answer
190 views

Initial margin requirement as percentage, not dollar value

Problem from Finan, FM/2 On 12-30-1998, you decided to bet on the January effect. ON that day, you bought 400 shares of Microsoft on margin at the price of 139 per share. The initial margin ...
0
votes
1answer
350 views

How to adjust local currency returns to US$/EUR return?

Iam doing research on return characteristics. As of today the scope of the research has changed from a local investor point of view to an international investor point of view. This basically means ...
2
votes
1answer
719 views

What exactly is an ISO order?

I have been looking this up and I feel like I keep running into different definitions. My understanding is that an ISO order is one which will get filled with the displayed quantity in a particular ...
2
votes
2answers
692 views

Calculating Geometric mean

I need to annualize daily returns for about 120 firms for over a period of 10 years. I chose to calculate the geometric return because 1) it is the actual return 2) to avoid the asymmetric effect of ...
3
votes
1answer
109 views

Can Central Index Keys (CIKs) issued by the SEC be reassigned?

Suppose company A has CIK 0000012345 and ceases to exist. At some later time, company B registers with the SEC to submit filings. Is it possible that company B will be assigned the same CIK ...