Tag Info

Hot answers tagged

5

I would reckon this to be a very hard exercise. Unless you know the inner workings of such algorithm and how the news was exactly interpreted you have no idea about what went "wrong" and on which side such opportunities reside. One thing I know for sure is that most all algos that capitalize on news capture primarily the numeric part of the news event. I ...


4

Your equations are for cum-dividend prices, i.e. the price plus dividend today. The paper refers to ex-dividend prices. The correct two equations for investor group $a=1$ are \begin{align} p^1(0) =&\ \frac{3}{4} \left(\frac{1}{2}p^1(0) + \frac{1}{2}(1+p^1(1))\right) \\ p^1(1) =&\ \frac{3}{4} \left(\frac{2}{3}p^1(0) + \frac{1}{3}(1+p^1(1))\right) ...


2

I think the market participants behavior on the micro-level is not different in principle from the behavior on the macro-level. The challenges of better news interpretation, and faster response time are very similar on all levels. There may be a little bit more trading opportunities in HFT, but building HFT strategy and infrastructure is very expensive, ...


2

If you can observe prices at a very high frequency, then "news" is defined as a lot more things than if you are observing prices at a lower frequency. So what you are calling corrections are also news for the high frequency guy because he can observe prices that fast, so do not consider these as corrections to the original news, consider this to be a ...


2

I can understand your concerns, but I think you are expecting too much from these theories. We cannot explain aggregate behavior from first principle based on a sound theory of individual decisions under uncertainty and I personally doubt that there will ever be such a Grand Unification in economics. Consumption-based asset pricing models are more related ...


1

Consumption-based asset pricing theories are about representative agents, not necessarily about traders and investors in financial institutions. The agents are assumed to follow behaviors based on how people generally would decide whether to invest and how much to invest. The idea is that the average person in the economy does not invest for the joy of ...


1

I think in this case no fancy normalization techniques are implied. At least from what I understand from the cited part, they just scale the variables so that they are equal to 100 in the base period (end of preceding year) - something like computing a deflator, commonplace in macro analysis.



Only top voted, non community-wiki answers of a minimum length are eligible