Questions tagged [econometrics]

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5
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0answers
204 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 ...
4
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0answers
293 views

Fourth moment of ARCH(2)

I am studying the ARCH(2) process given by $$X_t = \sqrt{h_t} \varepsilon_t$$ where $$h_t = \alpha_0 + \alpha_1 X_{t-1} ^2 + \alpha_2 X_{t-2} ^2$$ and $\varepsilon_t$ follows $N(0,1)$. ...
3
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2answers
95 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
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1answer
172 views

evaluating garch models

I used ugarchroll to backtest my garch model on S&P returns this is my code ...
3
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0answers
502 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
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1answer
946 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 ...
2
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0answers
40 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
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0answers
42 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
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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 ...
2
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0answers
51 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
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0answers
84 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)...
2
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0answers
79 views

Econometrics - Granger Causality

Suppose we have two time series, if one has autocorrelations and the other is non stationary how do we test whether they Granger cause a returns series?
1
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1answer
62 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 ...
1
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0answers
52 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 $v_t$...
1
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0answers
86 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 ...
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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.
1
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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 ...
1
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0answers
353 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 ...
1
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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\...
1
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0answers
55 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 ...
1
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0answers
61 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
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0answers
89 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 ...
1
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0answers
97 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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0answers
231 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
32 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
228 views

How to decide if the ARCH coefficient is necessary in the GJR-GARCH model?

I did some analysis for CAC 40, the French market benchmark, for the period 2005-2014, and I tried to fit the data with a GJR(1,1) model in MATLAB. Then some warning showed Lower bound ...
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0answers
135 views

MLE estimate of normal distribution

Probably a naive question. I am quoting this from Greene's econometrics book: "The occasional statement that the properties of the MLE are only optimal in large samples is not true, however. It can ...
1
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0answers
28 views

Standard errors clustered along the time dimension in pooled panel logit model

I'm trying to estimate a logit model on pooled panel data set (unit of observation is firm-year). My dependant variable is default indicator and I have several macro variables as independant variables....
1
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0answers
84 views

How to value a portfolio of non-mature consumer loans?

I'm looking for the best way to value a portfolio of consumer loans that have NOT reached maturity and for which I do observe the payment/default history to date? I'm working with a large database of ...
1
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0answers
653 views

Autoregressive distributed lag models ADL(p,q) howto in preferably matlab (stata/R/python/C# etc)

Could anyone provide me the details of how to determine the lag order of the distributed lags for an ADL(p,q) model in Matlab or another statistical package (and very much preferably in combination ...
1
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0answers
116 views

Max Likelihood via Marquardt Optimisation

I asked a related question here: How to apply Levenberg Marquardt to Max Likelihood Estimation I tried the approach suggested it works for some of the parameters but not the variances. I spoke to ...
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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 ...
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0answers
25 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 ...
0
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1answer
139 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}=\...
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0answers
56 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 ...
0
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0answers
55 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
49 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 ...