Questions tagged [econometrics]
The econometrics tag has no usage guidance.
153
questions
1
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0answers
40 views
What is the best approach to modeling local time series house prices?
I have a dataset of house prices over time and have broken it down into neighbourhoods. For each neighbourhood I would like to create a time series model that captures the local price movements. What ...
1
vote
0answers
26 views
Cross-checking Treasury's Major Foreign Holders Report
I was looking for bad things waiting to happen on the Ides of March, and the next Major Foreign Holders of Treasury Securities report came up as a candidate. It is due on March 15th, 2021. The report ...
0
votes
1answer
29 views
Fama-French model interpretation of coefficients help
So i've run a regression for a stock and these are the results. I was wondering if I'm right in inferring that because the SMB coefficient is negative, this particular stock I've chosen has a large ...
0
votes
0answers
44 views
What is the Id in the ARIMA model in Notes on financial risk of Privault?
I hope this is the right place to ask this question. I am studying the time series from Privault's Notes on Financial Risks. In the ARIMA model part I can't understand what is "I_d", it is ...
1
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0answers
32 views
Examining individual portfolio allocation changes over time
I am currently working with a pretty large panel dataset containing the investment holdings of many individuals over time (i.e., for each individual I know the positions per stock over time). I was ...
-1
votes
1answer
93 views
How to show that a Brownian motion is normally distributed and that the covariance is zero? [closed]
I need help under standing this question. So i have the following given the logarithm of the price of a share of stock is given by
\begin{align*}
p(t)=p(0)+\mu t+\sigma W(t), \quad t \in[0, T]
\end{...
1
vote
1answer
72 views
Looking for a good introduction to modelling ARCH-type models
I am starting to think about my dissertation topic for my undergraduate degree.
I am interested in comparing volatility of stock indices during COVID-19 to the years leading up to the pandemic. I have ...
4
votes
3answers
246 views
Correlation vs. dependence in finance
I found an example that shows how two uncorrelated random variables can be dependent: a normally distributed variable $X$ is not correlated with its square $Y=X^2$. What can be $X$ and what can be $Y$ ...
3
votes
1answer
129 views
Which references would be useful as an introduction to econometrics as it pertains to CONTINUOUS TIME models?
It seems like the problem of trying to estimate model parameters for continuous time models is not commonly covered in standard econometric textbooks, even those focusing on time series. I certainly ...
2
votes
1answer
77 views
Question on the use of a limit in a proof
I ran into a step in an argument that I can't quite figure out. It's basically how they use a limit that I don't seem to understand. The context is local-to-unity asymptotics in vector autoregressions,...
-1
votes
1answer
115 views
Why is Banque de France using BVAR with different orders of integration?
Don't all the variables used have to be of the same order of integration in VAR models ?
In this paper Bayesian VAR Forecasts, Survey Information and Structural Change in the Euro Area Gergely Ganics ...
0
votes
1answer
94 views
Monte Carlo approach and methods for generating random returns
Recently I found myself reading more about Monte Carlo approach in m.v. portfolio optimization framework.
I already discuss the topic on this forum (if interested please consider the following links - ...
1
vote
0answers
56 views
Can you approximate stochastic volatility processes using GARCH processes?
Let me specific. Suppose that you have the following process:
\begin{align}
z_t &= \sigma_t \epsilon_t \\
\sigma_t &= \sigma \exp \left( \frac{v_t}{2} \right)
\end{align}
where $v_t$...
0
votes
1answer
69 views
Is it legitimate to assess the resilience of industries and sectors through the stock market?
I would like to assess the resilience of some sectors in Europe but I honestly lack data, and it seemed to me the simplest solution to be able to implement univariate (arima etc) and multivariate (...
0
votes
0answers
13 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
46 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
152 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
99 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 ...
9
votes
2answers
594 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
111 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, the copula family ...
0
votes
2answers
206 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
1k 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.
3
votes
2answers
96 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
190 views
evaluating garch models
I used ugarchroll to backtest my garch model on S&P returns
this is my code
...
1
vote
0answers
43 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
124 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
214 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
43 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
183 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 $N×1$ vector of ...
1
vote
0answers
448 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
83 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) = -...
4
votes
0answers
233 views
Annualization of higher-order co-moments (coskewness and cokurtosis arrays)
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
55 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
57 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
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0answers
33 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
65 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
32 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
34 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
64 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
91 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
2k 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
84 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
62 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 ...
1
vote
0answers
56 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
206 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
93 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
vote
0answers
102 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
54 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 ...
