Questions tagged [research]

For questions citing or requesting references to academic and/or professional research.

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1answer
49 views

0.0006 r-squared after trying to test whether the intercepts differ significantly. Did I do it wrong?

I am trying to test if the intercepts of two linear regression (CAPM) differ significantly or not. I have 2 fund's monthly return in the same period and regress them on the same market variable (MKT = ...
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0answers
45 views

Searching for two papers of H.Leland with regards to capital structure

I am searching for two papers of H. Leland which I assume previously were online, as many published papers have cited them. The first work (Lecture notes) extends the Leland(1994a) model by ...
7
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4answers
1k views

Why should there be an equity risk premium?

After years of mathematical finance I am still not satisfied with the idea of a risk premium in the case of stocks. I agree that (often) there is a premium for long dated bonds, illiquid bonds or ...
3
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1answer
90 views

Is there such a thing as resonance in economic underliers?

In physics the occurence of resonance is explained and widely understood in its linear form and subject to research in nonlinear resonance. Example for instance are resonant frequencies of objects. ...
3
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2answers
187 views

Intraday data frequency

How should I determine what frequency should I use for doing microstructure research using intraday data? For some reason, there seems to be general consensus of using 5 minute interval, but is there ...
2
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0answers
70 views

How do I, as a student, discover whether (new) papers consist of important contributions?

I am a master's student and have just started reading research papers regularly for the first time. I usually browse articles on arXiv. One of the main difficulties I've run into is figuring out ...
96
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17answers
17k views

Video lectures and presentations on quantitative finance

What are your favourite video lectures, presentations and talks available online? A few rules: Must be related to quantitative finance. No Economics 101 courses, please. Try to avoid DIY lectures ...
9
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3answers
6k views

What mathematical theory is required for high frequency trading?

I am an applied math postdoc and I have been presented with the option of leaving academia to work in high frequency trading. I wanted to get a feel for the field and the theory underlying it so I ...
18
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5answers
2k views

Resources for finding scholarly research on topics in quantitative finance?

A friend and I are starting from scratch—neither of us have backgrounds in finance. Currently when we have a question, e.g. What variations on the Slow Stochastic Oscillator have been explored, ...
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0answers
57 views
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0answers
4k views

Bridgewater's Daily Observations

Bridgewater Associates send out Daily Observations to their clients, but I haven't found many traces of these publications online. The series started some 40 years ago by Ray Dalio, and there're just ...
1
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1answer
227 views

Free E-books for students on Volatility Models

Some e-books are free for students when they are on the university IP. So can anyone provide a list of free e-books for students and free e-books in general about (stochastic) volatility modelling?
2
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1answer
321 views

Why are there so few published research papers that apply Deep Learning to Algorithmic Trading?

The only related papers I can find are: Financial Trading as a Game: A Deep Reinforcement Learning Approach (2018) Deep Neural Networks in High Frequency Trading (2018) MACHINE LEARNING FOR TRADING (...
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0answers
95 views

Does Academic Research Destroy Stock Return Predictability?

McLean/Pontiff (2016) give evidence that portfolio returns are 26% lower out-of-sample and 58% lower after publishing an academic paper on variables, which are likely to predict cross-sectional ...
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0answers
11 views

Research on the performance of listed subsidiaries

Some countries (India, Pakistan, Nigeria, among others) seem to force multinational corporations that do business there to list the local operation on the national stock exchange and to let public ...
1
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1answer
52 views

How does inflation impact stock returns? Academic examples

For a literature survey in my university class, I have been asked the question "How does inflation impact stock returns?". After reading some informal articles (in periodicals/ the general internet), ...
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8answers
13k views

How are cryptography and speech recognition technology applied to forecasting financial markets?

One of the answers to my previous question regarding the strategy of Renaissance Technologies, there was a reference to The Quants: How a New Breed of Math Whizzes Conquered Wall Street and Nearly ...
1
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1answer
35 views

How to measure the impact of regulation on fund fees?

I want to measure the impact of mandatory disclosure on inducements on fees. I thought about doing a difference-in-differences analysis around the date of the new regulation with mutual funds as the ...
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6answers
25k views

How high of a Sharpe ratio is implausibly high for a low-frequency equity strategy?

I am looking to convince someone that an annualized Sharpe Ratio of 7 is 'extremely high' for a low frequency (daily rebalancing, say) long-short technical strategy on U.S. equities. I was hoping for ...
0
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1answer
75 views

Studies utilizing Fama French factors

Are there any studies in reputed academic journals that have used the data library offered by Kenneth R. French regarding the Fama French 3 factor model? I wish to use this data in my master's ...
7
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1answer
273 views

Is there a compilation of old Lehman research out there?

Like the title says. Does anyone know of any compilations or have any old papers they'd like to share? So far, I've only found a few sporadic pieces that are easily Googled for.
14
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1answer
984 views

Can VIX be interpreted as a proxy for instantaneous volatility?

Bakshi et al., (2006) Estimation of continuous-time models with an application to equity volatility dynamics (Table 2) estimate the following Cox-Ingersoll-Ross model for market variance, $\sigma^2_t$:...
31
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5answers
8k views

Any research on how natural language processing can be used to forecast stocks?

Is there any published research of decent quality linking news or unstructured information to asset returns? I know that Thomson Reuters offers its Machine Readable news (MRN), so somebody must use it....
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0answers
128 views

Research topic on volatility

Currently studying about volatility, VIX and implied volatility as well as option pricing via stochastic volatility models. My question is how these are used in real life except of speculation. Do ...
31
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7answers
2k views

Why do some anomalies persist while others fade away?

In their 1990 book, A Non-Random Walk Down Wall Street, Andrew Lo and Craig MacKinlay document a number of persistent predictable patterns in stock prices. One of these "anomalies" is variously known ...
14
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1answer
2k views

How do I reproduce the cross-sectional regression in “Intraday Patterns in the Cross-section of Stock Returns”?

Recently I was trying to reproduce the results of "Intraday Patterns in the Cross-section of Stock Returns" (published in the Journal of Finance 2010). The authors used cross-sectional regression to ...
6
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1answer
2k views

Shannon's entropy for financial times-series (return)

I'm looking at Shannon entropy, and generaly at ways to tell noise from signal when observing intraday returns (at the minute level for now). In python, e.g. I've implemented the fomula (sum of P(xi)*...
14
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2answers
5k views

How to extrapolate implied volatility for out of the money options?

Estimation of model-free implied volatility is highly dependent upon the extrapolation procedure for non-traded options at extreme out-of-the-money points. Jiang and Tian (2007) propose that the ...
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3answers
1k views

Fama-French three-factor model vs four-factor (Carhart) and five-factor model

I'm performing a study where I compare the Fama-French three factor model to the CAPM on the Swedish industrials industry. I do this to compare which of the models is the best performer, but also if ...
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4answers
17k views

What is the best way to “fix” a covariance matrix that is not positive semi-definite?

I have a sample covariance matrix of S&P 500 security returns where the smallest k-th eigenvalues are negative and quite small (reflecting noise and some high correlations in the matrix). I am ...
2
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2answers
311 views

What are some classical papers to read for a mathematician looking to get into quant finance?

While searching around for some market making-related stuff I bumped into this paper https://arxiv.org/abs/1105.3115 and thought that I'll start digging through it and its References, out of lack of ...
3
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0answers
61 views

What study has shown that “about two thirds of acquisitions end up destroying shareholder value”?

The Best of Value Investing - Part 1 says: Study show [sic] that about two thirds of acquisitions end up destroying shareholder value. What study has shown that?
24
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3answers
7k views

What are the best sources for equity quantitative research?

What are the best sources of quantitative finance research in equities? I will list a couple and note an asterisk if the research is available by request (i.e. non-clients) or online: BAC-Merrill ...
4
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1answer
500 views

Market risk stress testing?

I am doing a research for a paper for market risk stress testing. In fact I found some information on the web about this important topic such as: Stress Testing from Art to Science Stress Testing ...
1
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2answers
207 views

Is there any good academic references for Forex inefficiency? [closed]

I am PhD in computer science, and I am pretty much clueless where can I look for good journals or conferences for Forex that talked about its inefficiency. Is there any good journals, conferences that ...
4
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1answer
108 views

Why should a factor not priced and yet is relevant to the return generating process

I am reading Elton's AFA presidential adress article here. http://people.stern.nyu.edu/eelton/working_papers/Expected_Return_Realized_Return.pdf In the paper, he is warning against using the average ...
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0answers
56 views

CAPM test methodology

Setting If we test the CAPM using Fama-MacBeth regressions we do the following: First, run cross-sectional regressions to determine the beta loading $$ R^i_t- r^f_t = a_i +\beta_i (R^M_t- r^f_t) + \...
0
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1answer
133 views

I want to publish my research framework for quantitative finance

I have spent numerous months writing a framework for testing and researching for strategies, I now want to publish this framework with hopes of possibly marketing myself. It includes quandl data as ...
5
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0answers
205 views

Quantitative approaches to measuring the effectiveness of a Stock Option Pricing Model?

My question contains many parts, but I will try to keep it somewhat focused. I am primarily looking for a framework to evaluate the accuracy of a stock-focused Options Pricing Model. One of the ...
96
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16answers
12k views

What concepts are the most dangerous ones in quantitative finance work?

There are a few things that form the common canon of education in (quantitative) finance, yet everybody knows they are not exactly true, useful, well-behaved, or empirically supported. So here is the ...
17
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3answers
4k views

Papers about risk management in algorithmic trading?

I am currently doing my research for my master thesis, which will clearly focus on the question of risk managment in algorithmic trading systems. I have done research about this topic and found some ...
4
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1answer
921 views

What is an appropriate hedge ratio for hedging a credit instrument with equity of the same issuer?

Given a bond and a stock issued by the same issuer, what is the appropriate ratio of bond-to-stock one should hold in order to minimize the specific risk to that issuer? Equivalently, what is the ...
3
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2answers
124 views

Time Lag for Market Inefficiency

I recalled reading a academic paper that studied how long a market exploitation took to get priced into the market. I am trying to find that article. I remember it stating that the market priced in ...
2
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2answers
95 views

s&p500 companies value vs growth

I was thinking of examining how the constituent companies of the s&p500 are affected by sentiment in crises. Is there any way to download stock prices for all the companies? Moreover how can I ...
7
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2answers
519 views

Cross Bid and Ask prices for Forex trading

I am using ITCH protocol to get the Market Data information for Forex and trying to implement LOB on it and what i have noticed is that Bid and Ask prices are crossing very often. Should that be ...
2
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1answer
472 views

How do I calculate Market Dividend Yield from this data?

Thanks for reading, I am trying to calculate the market dividend yield for this set of data. The authors define it as 'The market dividend yield (MDY) is the one-year dividend from the CRSP value-...
2
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1answer
90 views

Value measures other than P/B

Price-to-book is a very well-studied value measure. What research is there on non-P/B value measures? I came across a handful used by AQR (Sales/EV, Cash flow/EV, E/P, Forecasted Earnings/Price) but ...
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3answers
2k views

Historical Volatility vs Implied Volatility Performance in Pricing Options

I consistently read on academic papers, when pricing options, using implied volatility is better than using historical volatility. Because, market is more "forward-looking" and historical data is "...
2
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1answer
208 views

Which studies should be replicated?

In psychology voting on which studies should be replicated is established on a website. For economics, including financial economics, the ReplicationWiki (that I founded) offers a voting option but it ...
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0answers
39 views

Quantitative Business Cycle Investing

Is there a major article or even better a comprehensive recent review article showing quantitative evidence for the existence of the business cycle and measuring the trending and mean reversion on ...