Questions tagged [econometrics]
The econometrics tag has no usage guidance.
0
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2answers
55 views
Testing which index is a better benchmark to track stock prices
Let's say a Hedge Fund is tracking a stock price. Now the fund has three columns of data, Stock price, Index 1, and Index 2. All of these have data from 2016/01/01 - 2017/01/01. If the fund is to ...
0
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0answers
33 views
Why does an increase in eviction court filings result in an increase in REIT returns?
I'm a data mining developer working for a company that wholesales eviction record data on a national level. I was recently assigned a project to build a program to mine all county courts in Oklahoma ...
1
vote
1answer
81 views
Understand the white noise condition in Vector Autoregression
In the following vector autoregression model with lag polynomial representation:
$$\Phi (L) y_t= \epsilon_t$$
where $Y$ is the vector of endogenous variables, $\Phi$ is the parameters matrix, $\...
1
vote
1answer
65 views
Using interest rate as a discount factor in dividend discount model
In this paper, Galí and Gambetti calculate the fundamental value of asset price by using policy interest rate as a discount factor. I was wondering if the policy rate can be used in this kind of ...
1
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0answers
47 views
What's the slowest frequency over which bid-ask bounce effect are observed?
I am using minute-by-minute stock prices series constructed on transaction data. The stocks are among the most highly liquid.
I observe that the price series contain negative autocorrelation. I ...
1
vote
1answer
46 views
Can GARCH volatility simulations generally be applied to return-modelling models?
This may be a naive question, but I still hope some discussion can elucidate a (so far) totally nebulous point for me.
I've recently learned that GARCH models can give one simulations of ...
0
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0answers
45 views
Trading Signals with Different Lags
I have a momentum signal that gives best predictive power at 3 months and a valuation signal that gives best predictive power at one year. If I combine for a 3 month horizon by "interpolating" the ...
3
votes
1answer
99 views
End Dates of Financial Crises
I am analyzing past financial crises, comparing the correlation structure amongst 20 broad market indices (equities, FX, credit, commodities) during different crises using amongst other things PCA and ...
0
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0answers
22 views
Panel data econometrics: Looking for a easy-to-replicate academic paper
I have to write an assignment for a panel data econometrics Course. One fallback is to simply replicate an academic paper. Hence, I'm Looking for a paper which uses basic fixed and random effects ...
4
votes
2answers
143 views
Lagged Residual as Independent Variable
I am building a factor model to estimate future equity returns. I'd like to include an autoregressive residual term in this model. I'd like to have yesterday's error (the difference between yesterday'...
0
votes
1answer
33 views
Drop weekend data Vs fill weekend data for GARCH-type modelling
I have a dilemma for an analysis I'm currently on. I doing some GARCH modelling of bitcoin and a fiat currency.
There are some null values with the fiat datasets in comparison with bitcoin data as ...
4
votes
1answer
144 views
What is the stambaugh bias? Why is it important for predictability regressions?
What is the Stambaugh bias? Why is it important for predictability regressions?
Can anyone explain it in simple terms?
5
votes
2answers
360 views
What is time-varying risk premium? Forecasting stock returns
I am trying to understand the concept 'Time-varying aggregate risk premium'.
Here is an extract from a Forecasting book, written by Rapach and Zhou,
"However, rational asset pricing theory posits ...
1
vote
1answer
91 views
Average Return Differential Calculation - Newey West t-Statistic
I am reading Table II on page 28 in Bali et al. (2007), Value at Risk and the Cross-Section of Hedge Fund Returns:
Please can anyone explain the calculation of t-statistic and Newey West t-statistic ...
0
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0answers
76 views
Comparing two models using Wald Test
I would like to use a Wald test to compare two models.
To give a basic example, let:
$Y_{t}=\alpha+{\phi_1x}_{t-1}+{\beta}_{1}x_{t-1}+{\beta}_{2}x_{t-1}+{\beta}_{3}x_{t-1}+\epsilon_t (A)$
$Y_{t}=\...
0
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0answers
48 views
Good introduction to estimating stochastic diffusion processes?
So, in an advanced Econometrics course, the current topic relates to estimating transition densities and diffusion processes by MLE, such as this R package doc describes, for ex., and I have to admit ...
0
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0answers
48 views
Applicability of econometric models in forecating one-month ahead covariance matrices
For example, in the paper A Test of Covariance-Matrix Forecasting Methods, Zakamulin (2015) forecasts monthly covariance matrices by multivariate GARCH models from daily data. He does this by making ...
2
votes
1answer
1k views
Interpreting the coefficients of Fama-MacBeth regression
According to Fama & MacBeth (1973) two-step regression, you start with estimating the beta factors. When applying the Fama-French 3-Factor model, you first run the linear regression
$$r_{i,t}=α_i+...
3
votes
1answer
149 views
Criticise GARCH relative to Realized Volatility
I would like to have your opinion about a simple question.
While GARCH would be useful to calculate the conditional volatility, and the RV being in some sense the "historical" volatility, what would ...
13
votes
2answers
188 views
Quantitative features of asset price bubbles beginning
Surprisingly, I've found very little research on this topic. Research papers I've come across propose some simple models to say that asset prices might be in a bubble. Most of the models take these ...
1
vote
1answer
49 views
Interest rate model with external variables
There are several well-known one-factor interest rate models: Hull-White, Ho-Lee and Black-Derman-Toy just to name a few. There are also multi-factor models such as Longstaff-Schwartz and Chen. But ...
3
votes
1answer
920 views
How to compute a Fama-Macbeth R-Squared (R2)?
I'm reaching out regarding the R-Squared of a Fama-Macbeth regression. This is often reported in econometric results but I have yet to find a good explanation of how it is computed.
Specifically, if ...
5
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1answer
723 views
Financial economics vs finance [closed]
What is the difference between financial economics and finance? How does affect career options as well as academic opportunities?
6
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1answer
2k views
Fama Mac-Beth (1973) vs Fixed effect
Currently testing if monthly fund characteristics (size, capital flows, age, risk, persistence,...) explain funds abnormal returns.
My data is set as a panel with 1000 equity mutual funds over the ...
3
votes
2answers
729 views
Choosing the right statistical test for Mutual Fund Performance Evaluation
How do you suggest I do this?
I would like to perform a statistical test to check if:
the aggregate alpha of all funds equals 0.
the aggregate beta of all funds equals 1.
Data
Sample of 1000 ...
0
votes
1answer
400 views
The R-squared of the four factor model.
Why does papers such as Fama and French (2010) and Barras et al. (2010) construct equal weighted portfolio of all funds when they analyse the aggregate performance of mutual funds?
They both report ...
3
votes
2answers
210 views
Fama and French (market premium) factor
Currently I am using the Fama and French 3 factor model to explain the performance of mutual funds using monthly returns from 2000 to 2017.
I use two market proxies:
(1) RM-RF, obtained directly ...
0
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0answers
34 views
Multi-Variate linear modeling: how to calculate mathematically vs brute force genetic optimization
I have a hand full of daily economic data. I am currently using a brute force approach. Genetic optimization is only used when k is very large. This method is beautiful to me, but isn't valuable ...
-1
votes
1answer
309 views
Carhart (1997) momentum factor loading
I am evaluating the performance of a sample of 1000 mutual funds over the period 2000 to 2017 using Carhart (1997) four factor model.
As a way to test for robustness, I use two benchmarks. The CRSP ...
0
votes
1answer
66 views
R-squared increase dramatically when including “time dummy” (STATA)
Currently running a fixed effect panel using STATA. First, I declare data set as panel:
Code: xtset id obs
Where id = 350 firms and obs = 125
Then I run a fixed effect regression:
Code: xtreg y x, ...
0
votes
2answers
74 views
Disadvantages of large panel
I am currently researching if some fund characteristics such as (fund size, fund family size, capital flows, and fund age) explains fund performance measured (monthly alpha).
Therefore, I am using a ...
1
vote
1answer
226 views
Predict the behavior of a time series (P&L trading desk)
I work at the trading desk P&L department at a large bank.
The trading desk has positions in almost all sorts of derivatives (options, futures) over a long list of stocks, currencies, commodities.....
1
vote
1answer
230 views
Granger causality with stocks and CDS
I would like to take a closer look at stock prices and CDS spreads of different entities. Because both of them are nonstationary in levels, I use log stock returns and the first difference of the CDS.
...
4
votes
1answer
196 views
Panel data - Use fixed effect or random effect in predicting stock returns
I'm currently writing a master thesis where I look at the predictive power of Google search volume in predicting the movement of the Norwegian Stock Market (Oslo Børs). I'm using Google search volume ...
4
votes
0answers
307 views
Can a stat arb alpha be a global macro alpha?
In academic literature, "statistical arbitrage" is opposed to (deterministic) arbitrage.[1] In deterministic arbitrage, a sure profit can be obtained from being long some securities and short others. ...
3
votes
0answers
79 views
Why is utility concave?
I have read that the utility function is usually concave. I assume this requirement arises in order to meet the diversification effect:$$f(\lambda_1c_1+\lambda_2c_2)\ge \lambda_2 f(c_1)+\lambda_2f(c_2)...
0
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1answer
169 views
Most GUI user friendly Time series Econometrics software for modelling and Forecasting GARCH models [closed]
I think the question is simple enough. I have been using Eviews, but it is unable to do recursive one step ahead forecasting directly and requires me to use coding, which I'm not very good at.
I need ...
1
vote
1answer
173 views
Use of ACD to model transaction durations
I am using a simple ACD (autoregressive conditional duration) model with expoential or Burr distributed residuals and 1 lag, i.e. ACD(1,1).
I am modelling durations for transactions data on a 'medium'...
1
vote
1answer
101 views
How to find relationships between financial data?
Suppose I have a time series of stock growth and one of gdp growth and education over the years.
Can I try to explain stock using gdp and education by running an OLS or would I be mistaken from a ...
1
vote
1answer
812 views
Which python packages would you recommend for time series analysis?
I am taking a time series analysis class that uses EViews. What packages in python do equivalent work?
0
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1answer
35 views
basic econometric model on country spread methodology
I am doing some research on Germany, France and Spain on their spread.
I would like to try to 'forecast' or 'explain' the the spread on sovreign debt using OLS regression on unemployment and debt ...
0
votes
1answer
43 views
Simulating Co-Integrated Assets
I know how to simulate correlated returns, but I do not know how to simulate Co-Integrated assets. I would like to simulate a co-integrated time series where the Beta Co-Efficient is not constant, but ...
0
votes
1answer
4k views
how to convert quarterly data to monthly
Is there any way to convert quarterly data to monthly in excel or preferably in STATA?
I
Next to that, how can I transform dates in excel so as to be recognized by STATA?
0
votes
0answers
143 views
Computing the Coefficients for the Unemployment, Inflation, Trade Balance Equation
Based on S. Nickell's theory on how to relate trade deficit, unemployment, inflation, I tried to fit the data to the formula Nickell presents,
$$ [ \alpha_1 + \delta_1 \alpha_{12}]u + \alpha_2 \...
1
vote
1answer
347 views
Standard Stochastic Volatility Models VS Moving Average Stochastic Volatility Model
Hi... I am comparing the log-volatility of two SV models with an application to MATLAB. Since I am a rookie in this field, I do not know if I am wrong in interpreting the graph. In my opinion the only ...
31
votes
5answers
4k views
Why aren't econometric models used more in Quant Finance?
There is a big body of literature on econometric models like ARIMA, ARIMAX or VAR. Yet to the best of my knowledge practically nobody is making use of that in Quantitative Finance. Yes, there is a ...
1
vote
0answers
31 views
Machine Learning Munging - order of transforms? + adding in econometric tests?
I have a list of possible transforms, and I've read some confusing/contradictory stuff about the preferred order in which these operations are performed. Maybe 1) the order is sometimes amorphous, ...
1
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0answers
38 views
How to enter to economics/finance sector [closed]
Although my question is a general question, I would appreciate your suggestions or help me to find a proper "stack exchange" in order to ask my question:
I am a Ph.D student in (Pure)Mathematics and ...
1
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1answer
308 views
Is there any package in R for conditional autoregressive range model (CARR)?
I am working on a project which requires volatility estimation using range based volatility. Is there any package in R which helps me in estimating the CARR model proposed by Chou (2005).
1
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0answers
520 views
How to fit exogenous + GARCH Model In Python?
I am studying a textbook of statistics / econometrics, using Python for my computational needs. I have encountered GARCH models and my understanding is that this is a commonly used model.
In an ...
