# richardh

Moderator ♦ less info
reputation
519
bio website location age member for 2 years, 3 months seen May 13 at 13:25 profile views 219

finance PhD student

# 197 Actions

 Jan31 awarded Yearling Sep21 awarded Custodian May30 revised How to perform risk factor calculation?Added subscript i to alpha May30 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. Mar26 awarded Nice Answer Jan31 awarded Yearling Jan4 awarded Nice Answer Dec16 awarded Nice Answer Nov30 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.) Nov30 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 $i$. Nov29 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. Nov28 answered How to generate a random price series with a specified range and correlation with an actual price? Nov28 answered zero-sum active management riddle Nov27 reviewed Approve suggested edit on How to use Itô's formula to deduce that a stochastic process is a martingale? Nov27 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. Nov18 comment Convexity of BS Equation for Call and PutMy first stop is checking $Call(\cdot, \lambda \sigma^2_1 + (1 - \lambda) \sigma^2_2) \leq \lambda Call(\cdot, \sigma^2_1) + (1 - \lambda)Call(\cdot, \sigma^2_2)$. Nov14 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). Nov14 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. Nov14 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. Nov14 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).