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

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112 votes
18 answers
17k 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 ...
110 votes
17 answers
22k 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 ...
50 votes
3 answers
6k views

What papers have progressed the field of quantitative finance in recent years (post 2000)?

My question is pretty simple: what papers do you feel are foundational to quantitative finance? I'm compiling a personal reading list already, drawn from Wilmott forums, papers referenced in ...
48 votes
4 answers
23k 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 ...
Ram Ahluwalia's user avatar
40 votes
9 answers
5k views

Has high frequency trading (HFT) been a net benefit or cost to society?

Various studies have demonstrated the very large and growing influence of high frequency trading (HFT) on the markets. HFT firms are clearly making a great deal of money from somewhere, and it stands ...
Tal Fishman's user avatar
  • 13.5k
36 votes
7 answers
3k 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 ...
Tal Fishman's user avatar
  • 13.5k
32 votes
2 answers
9k views

Have Goldman Sachs Quantitative Strategies Research Notes been published as a book or a comprehensive collection?

Back in the 90's, Goldman Sachs (publicly?) released a series called "Quantitative Strategies Research Notes" — mostly technical papers on topic. Emanuel Derman co-authored almost all of them. Some ...
Anton Tarasenko's user avatar
31 votes
6 answers
9k 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....
gappy's user avatar
  • 3,593
29 votes
8 answers
21k views

What are the best Journals & Conferences in Quantitative Finance?

What are some of the most prominent journals, conferences and publishing venues in Quantitative Finance research? Where can I find information more information about them? (e.g. impact factor and ...
Amelio Vazquez-Reina's user avatar
28 votes
8 answers
16k 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 ...
vonjd's user avatar
  • 27.5k
27 votes
6 answers
4k views

Most successful investors using academic-based framework?

What are the most famous/best performing absolute-return funds employing approaches based on mainstream finance theory (i.e., theory presented in Journal of Finance, AER, Econometrica, using typically ...
gappy's user avatar
  • 3,593
27 votes
3 answers
8k 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 ...
27 votes
4 answers
4k views

What are the recent quantitative finance papers we should all read?

Which papers released in the last five years should all quants read to keep up to date on recent developments? See this question for the best must-read papers of all time. The bar for inclusion for an ...
26 votes
3 answers
8k views

Papers about backtesting option trading strategies

I am looking for all kinds of research concerning option trading strategies. With that I mean papers that publish results on different option trading strategies properly backtested with real-world ...
vonjd's user avatar
  • 27.5k
22 votes
4 answers
11k views

Is there any good research on support and resistance?

Could somebody advise me on where to find good literature on the justification or motivation for using support and resistance lines - and also lines of maximums and minimums. In finance, it is ...
SBF's user avatar
  • 2,623
21 votes
6 answers
29k 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 ...
shabbychef's user avatar
  • 2,836
21 votes
1 answer
6k views

academic papers about market making

I am looking for academic articles which model the p&L of market makers. I have read the Ho-Stoll (1984) article. Is there any recent article on this subject?
neticin's user avatar
  • 365
21 votes
4 answers
14k views

Is statistical arbitrage on FX possible?

Do you know of any papers which consider pairs trading (or statistical arbitrage) on foreign exchange? I couldn't find any. I asked this question on several forums and got no reply. Thus, I guess ...
Alexey Kalmykov's user avatar
19 votes
7 answers
3k views

Are there ways to measure the risk aversion of a representative investor, based on publicly available market data?

Are there ways to measure the risk aversion of a representative investor, based on publicly available market data? Public available data could include asset price, volume, and flow data, and may be ...
gappy's user avatar
  • 3,593
18 votes
5 answers
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, ...
Andrew Cheong's user avatar
18 votes
2 answers
2k views

How to forecast expected volatility from high-frequency equity panel data?

I'm wading through the vast sea of literature on realized volatility estimation and expected volatility forecasting (see, e.g. Realized Volatility by Andersen and Benzoni, which cites 120 other papers,...
Tal Fishman's user avatar
  • 13.5k
18 votes
3 answers
6k 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 ...
Carol.Kar's user avatar
  • 482
18 votes
1 answer
619 views

performance of historical VaR parameters

An historical VaR measure is parameterized in terms of the confidence level and also number of periods. Specifically, the $\alpha$% T-period VaR is defined as the portfolio loss x in market value over ...
Ram Ahluwalia's user avatar
17 votes
6 answers
4k views

References for developing an automated trading system?

I am looking for references on the architecture of automated trading systems and the trading algorithms behind them. I am more interested in system development than analysis. A couple of books I ...
Tae-Sung Shin's user avatar
17 votes
2 answers
7k 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 ...
Tal Fishman's user avatar
  • 13.5k
17 votes
2 answers
7k views

Is there a website that lists replication code of financial papers?

There are lot of questions on this website related to the replication of the empirical part of financial papers. I noticed that some (honest) authors provide on their personal website some ...
Malick's user avatar
  • 2,582
17 votes
2 answers
4k views

Best written quantitative finance papers

I have some writing experience, but I want to take my writing skills to the next level. I am particularly interested in writing quantitative finance papers for journals like Journal of Portfolio ...
dikdirk's user avatar
  • 171
16 votes
7 answers
3k views

Can social media be applied to algorithmic trading?

Can social media sites, like Twitter, be used to analyze financial markets for algorithmic trading? How much research has been done on this topic?
siamii's user avatar
  • 747
16 votes
5 answers
6k views

How can I quantitatively test the validity of momentum indicators?

I am learning about quantitative finance, and I am struck by how different it is from the techniques that make it into magazines and TV, particularly technical analysis. Specifically, if they say an ...
CptanPanic's user avatar
16 votes
1 answer
1k 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, $\sigma^2_t$:...
lowndrul's user avatar
  • 263
16 votes
0 answers
401 views

Proving the asymptotic distribution of Manipulation-Proof Performance Measure (MPPM) (Paper by Goetzmann et al.)

In Goetzmann et al.'s (2007) paper, the authors derive a "Manipulation-Proof Performance Measure" (MPPM), which is a performance measure that is impervious to performance manipulation by fund managers....
SwiftMo's user avatar
  • 325
14 votes
5 answers
3k views

What are the most crucial research areas currently in quantitative finance/interesting subfields?

What are some of the things that are currently being researched, or what are the big unanswered questions of quantitative finance that researchers are trying to solve? What are some interesting and ...
14 votes
1 answer
3k 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 ...
Dzidas's user avatar
  • 241
14 votes
3 answers
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 "...
berkorbay's user avatar
  • 1,051
13 votes
1 answer
6k views

open problems in mathematical finance

What are open problems in mathematical finance that use fundamental concepts of mathematics (functional analysis, geometry and topology, algebra and number theory etc.) and not data-driven. I have ...
12 votes
4 answers
2k views

What is the impact of high-frequency trading on market depth, liquidity, and volatility?

On the surface, bid-ask spreads are far more narrow than even several years ago. However, during periods of financial stress liquidity seems to vanish. Also, the increasing amount of fragmentation (...
Ram Ahluwalia's user avatar
11 votes
3 answers
12k 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 ...
sonicboom's user avatar
  • 309
11 votes
2 answers
4k views

How we can forecast stock prices using chaos theory?

I saw an article in which the writer had mentioned that he used chaos theory to predict stock prices and ended up with a profit over 30%. Chaos theory is basically about finding patterns called ...
Egalitarian's user avatar
11 votes
0 answers
6k 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 ...
Anton Tarasenko's user avatar
10 votes
7 answers
7k views

Is there a quantitative finance ranking system for universities?

I am a PhD student in stochastic analysis/control and had a MSc degree in Financial Mathematics. I am interested in determining there is a quantitative finance ranking system for universities like ...
SBF's user avatar
  • 2,623
10 votes
1 answer
738 views

Any research paper on stop loss?

Has there been any rigorous study on stop loss ? When to apply it? Has it been shown to work through proper statistical backtests? I am interested in Equities, preferably European stocks.
Siddharth's user avatar
  • 101
9 votes
2 answers
6k views

Is there anywhere I can read the paper, "The Gamma-Vanna-Volga Cost Framework for Constructing Implied Volatility Curves"

Hello there was a paper published by: M. Arslan, G. Eid, J. El Khoury and J. Roth titled "The Gamma-Vanna-Volga Cost Framework for Constructing Implied Volatility Curves" (2009). I believe they ...
user avatar
9 votes
4 answers
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 ...
Richi Wa's user avatar
  • 13.7k
9 votes
1 answer
457 views

Which valuation measures are most useful for equity market timing?

Competing academic studies, such as Asness's Fight the Fed Model and Lee, Myers, and Swaminathan's What is the Intrinsic Value of the Dow, offer differing answers to the question of whether equity ...
Tal Fishman's user avatar
  • 13.5k
9 votes
2 answers
2k views

optimal re-balancing strategy with asynchronous alpha signal

You want to construct an optimal portfolio. Let's say you have an alpha signal that arrives with some period (say quarterly). The alpha signal predicts arithmetic returns one-year ahead. You have ...
Ram Ahluwalia's user avatar
9 votes
1 answer
679 views

Quantitative before/after or financial engineering studies of a bid or ask tax?

Has anyone in the quantitative finance or financial engineering community studied the effects of a bid or ask tax with actual or simulated data? If so, what were the quantitative results or ...
Paul's user avatar
  • 523
8 votes
1 answer
575 views

Toy models of asset returns

When making simple agent-based models of banking systems to look at global properties (say systemic risk) one of the basic decisions you have to make is how to model returns on external (to the ...
Artem Kaznatcheev's user avatar
8 votes
1 answer
384 views

Estimate price movement per unit of volume for daily data

I'm working on backtesting a number of stock trading strategies and need to estimate how much the execution price will likely deviate from the historical close price for that asset using daily data; ...
psandersen's user avatar
7 votes
3 answers
536 views

Should the average investor hold commodities as part of a broadly diversified portfolio?

Many mutual funds sell "asset allocation" products which include appropriately sized investments in a variety of asset classes meant for a prototypical investor. Some of these, such as PIMCO, even ...
Tal Fishman's user avatar
  • 13.5k
7 votes
4 answers
1k views

Do low volatility stocks outperform high volatility stocks over the long run?

A recent article from Forbes seems to indicate that low volatility stocks outperform high volatility stocks over the long run. Does anyone have any supporting or contradicting evidence to this claim? ...
Ralph Winters's user avatar