Questions tagged [econometrics]
The econometrics tag has no usage guidance.
141
questions
0
votes
0answers
8 views
A simple question about the dummies of structural variance (ICSS) breaks on GARCH
The question related to How to implement dummy variables into GARCH(1,1) model from structural breaks (ICSS)
I have a simple question about that.
Suppose my series have two breaks on t=2 and t=5 for ...
2
votes
0answers
29 views
Applying GRS-test on non-normal residuals with autocorrelation
Is it valid to apply GRS-test (Gibbons, Ross and Shanken 1989) on non-normal and autocorrelated residuals?
I got residuals using 10 test-assets regressed on 3-factor and carhart.
If it is valid, how ...
-2
votes
2answers
79 views
What's the difference between Statistics and Econometrics? [closed]
I can't really grasp the similarities and differences between Statistics and Econometrics.
Is Econometrics includes every Statistical models inside it? or is there areas of Statistics outside of the ...
1
vote
0answers
58 views
CAPM and the Fama-MacBeth (1973)
I need to conduct the Fama-MacBeth (FM) procedure for my thesis to test the ability of the six-factor model to predict future expected returns. In univariate regressions of expected excess returns on ...
0
votes
0answers
19 views
Using monthly CRSP EWRET to build equally weighted portfolios based on market equity and book to value ( SAS)?
I was wondering if it is possible to download the EWRET variable from Wharton in order to construct equally-weighted portfolios and rebalance every June? I have seen a few fancy codes for this ...
8
votes
2answers
504 views
Suppose that we are wrong about the relevant class of distributions for financial economics and econometrics. Now what?
I read a very interesting paper by Harris (2017) where he points out some interesting link between market microstructure and the distribution of returns on equity. You can make a good case that the ...
0
votes
1answer
52 views
What is the R code for estimating copula parameters of BB1 with dim=2? And what's the code for gof test of BB1?
Kindly assist with R code for BB1 copula. Text books and research articles provide codes for clayton, gumbel, frank, normal and t copulas. However, I can't find code for BB1.
For example, this is ...
0
votes
1answer
114 views
maximum likelihood pdf
I am looking at the topic maximum likelihood, and I cannot understand why we set the pdf of $y_{t}$ equal to 1. It is with regards to a OLS example.
The information i got is this:
Model: $y_{t}=\...
1
vote
1answer
298 views
Forecasting Volatility using GARCH in Python - Arch Package
Disclaimer: Posted this on stackoverflow, but maybe here should be the right place to ask something about GARCH
I'm testing ARCH package to forecast the Variance (Standard Deviation) of two series ...
1
vote
0answers
33 views
Asset prices Boom,Bust and Recovery cycles
Is there any systematic way to detect the Boom, bust and Recovery cycles in Asset Prices ?
Are there any good references about the Topic ?
Thanks in advance.
2
votes
2answers
62 views
Cash flows regression on macroeconomic data
I'm looking into a research project and am struggling to find any existing work on this or whether I'm asking the right question.
My question is to test the relationship between macroeconomic ...
3
votes
1answer
129 views
evaluating garch models
I used ugarchroll to backtest my garch model on S&P returns
this is my code
...
1
vote
0answers
41 views
Correlation coefficient without cash flows?
I'm an intern at a company and one of our tasks is to calculate the the probability of default of both participants of a Swap(a Client and a Bank), for which we first need the correlation coefficient ...
3
votes
2answers
121 views
Using cumulative returns to hedge against the overall trend
I am curious about a hypothetical strategy where you are long for a given period (like a year), and at the same time you hedge against the overall trend by going short everyday and accumulating the ...
2
votes
1answer
105 views
How to calculate Information Ratio?
In the book titled "Active Portfolio Management: A Quantitative Approach for Producing Superior Returns and Controlling Risk" by Grinold & Kahn, the information ratio is defined as "the ratio of ...
2
votes
0answers
39 views
Cointegration between prices and dividends. How do I get the following expression?
Actually, I have two questions:
1.
Let us assume that expected returns are constant. Then, we have the following expression for how the prices should be determined, provided that the operators are ...
2
votes
1answer
73 views
Gibbons, Ross, Shanken Test derivation by MLE
I Am trying to derive the expression for the GRS test of the CAPM. I am following the book: The Econometrics Of Financial Markets by Campbell, Lo, McKinley (1997).
Define $Z_t$ as an $NĆ1$ vector of ...
1
vote
0answers
199 views
How to normalize stock exchange indexes
I am doing an academic research in behavioral finance and I need to calculate my abnormal return based on the normalized returns of the stock exchange index being the S&P 500. In other words, I ...
0
votes
1answer
78 views
What does A(B) mean in time series
So I have been reading some papers regarding time series, mainly from Granger and Engle. I am a bachelor econometrics student, but I have never seen such notation before. For example, A(B)(1-B)x(t) = -...
3
votes
0answers
139 views
Annualization of higher order Co-moments
I'm developing a dynamic portfolio optimization procedure based on the implementation of the Modified sharpe ratio. The mentioned ratio depends, among other factors, on the skewness and kurtosis of ...
1
vote
0answers
54 views
Log transformation of TS-stationary time series
I usually see the $log$ transformation of prices: $$p_{new}\left(t\right) = ln\left(\frac{p_t}{p_{t-1}}\right), t \in [2...N]$$.
Let's our series be a trend stationary time series like: $$p\left(t\...
2
votes
0answers
32 views
Tools related to Granger Causality
I would like to know if there are some tools that can measure that one time series is "faster" than the second one. I talk about really similar time series related to high frequency trading (hundreds ...
1
vote
0answers
51 views
Statistical distribution of MACD
I was (unsuccessfully) trying to find results on what the distribution of the MACD values for a stationary time series with IID returns would be. Are there any such results or any that go in a similar ...
1
vote
0answers
31 views
Using CFNAI index for identifying sample periods
I'm doing my Thesis on Asset pricing models and I would like to find out the effects of business cycles on the performance of asset pricing models for industry portfolios.
My initial idea was to ...
4
votes
1answer
63 views
How to prove that the expected squared error associated with the optimal combination weight is smaller than the minimum of 2 forecast variances?
I am looking at linear combination of two forecasts (Bates and Granger, 1969). I would like to understand how to prove that the expected squared error associated with the optimal combination weight is ...
1
vote
0answers
30 views
Statistical procedures on comparing the four Asset pricing models [closed]
I'm a business student and currently writing my thesis on comparing asset pricing models on industry portfolio returns. Being a business student, I lack the knowledge for statistical analysis ; so I ...
1
vote
0answers
33 views
Granger Causality Equation between daily Carry Trade returns and daily Stock Market returns [closed]
Could someone please kindly help me in regards to a question on the Carry Trade.
What is the most widely used equation for the carry trade including the funding and investment currency and what ...
1
vote
0answers
53 views
Fractional cointegration in R
I'm looking for a package (or some code that anyone has written) that will help me to estimate a VECM for fractionally cointegrated series. I.e. like the ca.jo ...
1
vote
0answers
81 views
Evaluating Fama French 3 factor model Using Fama Macbeth
Hi Can someone please explain me how the cross sectional calculation can be done.
For an example, I'm having a vector like this.
Vector 1: This is the vector where all the excess returns for n ...
2
votes
1answer
1k views
Calculating the pricing error in Fama-Macbeth Regression for Fama/French 5 Factor model
I'm very much new to this area and I need to know on how to calculate the pricing error in Fama/French 5-Factor model. The evaluation was done using the Fama-Macbeth approach.
I did everything as ...
1
vote
0answers
62 views
Arbitrage argument and Market Quotes [closed]
Good day, I wanted to ask for help with a question from one of my exercise sheets.
For a share S the market quotes a given strike K in both european and
american styles. Use an arbitrage ...
0
votes
2answers
61 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
votes
0answers
44 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 ...
2
votes
1answer
134 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
78 views
Using interest rate as a discount factor in dividend discount model
In this paper, GalĆ 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
vote
0answers
85 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
53 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
votes
0answers
53 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
106 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 ...
4
votes
2answers
234 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
43 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
600 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?
4
votes
2answers
1k 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 ...
2
votes
1answer
159 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 ...
1
vote
0answers
151 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
votes
0answers
54 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 ...
6
votes
1answer
4k 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}=Ī±_i+...
3
votes
1answer
531 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 ...
15
votes
2answers
248 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
60 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 ...
