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5

Behavioral Finance is a wide topic, which I believe is still today underestimated by many financial professionals. How can it be used by quants? Well, in portfolio optimization it can be used "as an overlay" in the form of constraints where the optimal portfolio can not be too different from the current portfolio, because clients have behavioral biases ...


3

The general effect of quantitative analysis of the markets is to enforce randomness. Suppose a strategic quant finds a predictable pattern where a stock always rises on Tuesdays. His institution will commence buying the stock every Monday, and selling on Tuesday. The trading itself pushes the stock price up on Monday and down on Tuesday (in general), so if ...


3

There is a paper by Goldstein and Taleb (2007) which tries to address this question of what number captures investors intuitive feelings of the volatility of series of returns and whether this coincides with the standard deviation of returns. What they found was that Median Absolute Deviation does a much better job of capturing this intuition in a small ...


2

1) If you want to show an unsophisticated investor with like a real-time estimate of volatility, my main suggestion would be to fit a Garch model to the returns and use those estimates of the conditional volatility. Just provide a chart of it, rather than showing the model and all the details that go into calculating it. 2) If that is too complicated, you ...


2

Usually very good questions don't come with straight answers and I think this is the case here. I believe you have two (unfortunatly linked) problems here. One is to get a sense of investors aversion to risk and the other is to get a statistically "receivable" estimate of volatility. 1/ Different investors may be willing to take risk on significantly ...


1

More measurable effects to add to your list: "window dressing" - returns of the fourth quarter or 12th month (i.e. year-end) are higher on average than oher returns; the same to returns of 4th months (qtr-end) vs. others; "herding": changes in asset-classes shares of "big" funds (whatever you define "big") granger-cause changes in asset-classes shares of ...



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