richardh

3,025 reputation

519

bio	website
	location
	age
visits	member for	2 years, 3 months
	seen	May 13 at 13:25
stats	profile views	220

finance PhD student

	3,025 reputation	bio	website		visits	member for	2 years, 3 months
519 badges		location			seen	May 13 at 13:25

summary answers questions tags badges favorites bounties reputation activity

197 Actions

suggestions reviews revisions comments badges posts accepts all

Jan 31	awarded	Yearling
Sep 21	awarded	Custodian
May 30	revised	How to perform risk factor calculation? Added subscript i to alpha
May 30	comment	How to perform risk factor calculation? I think all of the theories have zero intercepts (i.e., only one risk-free rate)? Empirically you include the intercept to avoid forcing $\alpha_i = 0$ so that you can test if there is a return not correlated with the risk factors.
Mar 26	awarded	Nice Answer
Jan 31	awarded	Yearling
Jan 4	awarded	Nice Answer
Dec 16	awarded	Nice Answer
Nov 30	comment	zero-sum active management riddle (As well, I would guess that the Roll critique of these pricing models is particularly strong in these less-sophisticated markets.)
Nov 30	comment	zero-sum active management riddle @QuantGuy -- Other than the case of value-weighted portfolios and value-weighted market factor (i.e., CAPM), I don't know of a requirement for $\sum_i w_i \alpha_i = 0$ and $\sum_i w_i \beta_i = 1$, where $w_i$ is the value weighting for each portfolio $i$.
Nov 29	comment	How to generate a random price series with a specified range and correlation with an actual price? How? Try AAPL and MSFT. There are about 5000 more.
Nov 28	answered	How to generate a random price series with a specified range and correlation with an actual price?
Nov 28	answered	zero-sum active management riddle
Nov 27	reviewed	Approve suggested edit on How to use Itô's formula to deduce that a stochastic process is a martingale?
Nov 27	comment	Make assumption about future stock price: is the option with best return fairly clear? @Ray -- Please check out John Hull's book on options, futures, and other derivatives. It is very approachable and will help you frame a better question that we can answer.
Nov 18	comment	Convexity of BS Equation for Call and Put My first stop is checking $Call(\cdot, \lambda \sigma^2_1 + (1 - \lambda) \sigma^2_2) \leq \lambda Call(\cdot, \sigma^2_1) + (1 - \lambda)Call(\cdot, \sigma^2_2)$.
Nov 14	comment	How to check if a timeseries is stationary? @Dail -- There are a variety of tests, but Wald tests that all coefficients are jointly zero is probably the easiest. I searched for how to do this in R, but wasn't too successful. You will likely have to grab a text book and code the tests yourself. (I switched to Stata for most analyses because hypothesis testing is so much easier).
Nov 14	comment	How to check if a timeseries is stationary? @SKRX -- Yes, thanks. I should have included more commentary. He asked how to fit a GARCH model in R, so I gave some code. Once he determines the best-fitting GARCH model with ll, ic, and ssr, he can perform joint tests on the GARCH model coefficients.
Nov 14	comment	How GARCH/ARCH models are useful to check the volatility? The plots are helpful, but to determine if the GARCH model fits, you should use statistics. Look at the log-likelihood, sum-of-squared-residuals, and information criteria across various specifications to see which fits best. Then perform joint test of the GARCH coefficients. If you fail to reject that all coefficients are jointly zero, then you don't need a GARCH model.
Nov 14	comment	How GARCH/ARCH models are useful to check the volatility? `fitted.values` has +/- `sigt` (why isn't clear to me). You want to plot the positive `sigt` versus some time index. Something like this: `y <- arch_model$fitted.values[, 1]` then `x <- seq(1, length(y))` then `plot(x, y)`.