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Questions tagged [econometrics]

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0answers
22 views

Statistical procedures on comparing the four Asset pricing models [on hold]

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 ...
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0answers
27 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
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0answers
24 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 ...
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0answers
23 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
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1answer
103 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
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0answers
47 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 ...
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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 ...
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0answers
36 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
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1answer
85 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
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1answer
67 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
50 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
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1answer
48 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 ...
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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
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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
24 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
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2answers
157 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
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1answer
35 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 ...
5
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1answer
174 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
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2answers
529 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 ...
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1answer
94 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 ...
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0answers
78 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}=\...
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0answers
49 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 ...
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1answer
2k 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+...
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1answer
176 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 ...
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2answers
194 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
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1answer
51 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
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1answer
1k 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 ...
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1answer
809 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
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2answers
817 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 ...
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1answer
453 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
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2answers
221 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
36 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 ...
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1answer
353 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
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1answer
69 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, ...
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2answers
84 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
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1answer
251 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
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1answer
262 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
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1answer
212 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
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0answers
330 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. ...
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0answers
81 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
187 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
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1answer
206 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
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1answer
103 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 ...
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1answer
867 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?
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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
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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
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1answer
5k 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?
1
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1answer
376 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 ...
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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 ...