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Financial economics is what economics calls finance. Finance is what finance calls finance. Less flippantly though, there's a long debate on whether finance is a subfield of economics, and this debate goes back at least to the PhD thesis of Markowitz. Prof. Milton Friedman famously opposed awarding Markowitz a PhD in economics from the University of Chicago ...


7

Here's a snippet of a detailed list of data sources and tools which available on my blog at http://the-world-is.com/blog/resources/general-investor-resources/. Fundamental Financial Data Institutional: CompuStat (S&P Capital IQ) – Compustat offers what I believe to be the highest value instutional-level fundamental financial data. The data ...


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The master list already has dukascopy listed for forex historical tick data. Dukas also now has selected CFDs of indices, metal/energy, and individual stocks. The forex data for the majors go back to 1997 or so. It's free, so you get what you pay for. The data that is more recent (last 5 years) has almost 0 gaps on the majors and crosses. What was also ...


6

What you describe is known as the Equity Premium Puzzle - and it really is, as the name says, a real enigma: "The equity premium puzzle (EPP) is a phenomenon that describes the anomalously higher historical real returns of stocks over government bonds." Source: https://www.investopedia.com/terms/e/epp.asp#ixzz5HlCdHS2Z A good first introduction can be ...


6

An Interest Rate Swap (IRS) normally refers a swap between a fixed rate and a floating rate. Floating rate being a single fixing for each accrual period and payment. An overnight indexed interest-rate swap will have the daily overnight index compounded throughout the accrual period. A vanilla IRS will not compound during the accrual, being a term rate.


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Edit: adding some references (main body is untouched) Kenneth Rogoff and Richard Meese received an incredulous reaction to their now-famous paper showing that random-walk (RW) forecasts outperform economic models of exchange rates. Reactions were along the line of “You just cannot possibly have done it right” or "the results are obviously garbage". ...


4

Our startup SimFin, provides both historical and actual data for free, since we couldn't afford the pricey premium solutions back when we were students and wanted to overcome the hegemony of the data market. To this date, we have 70+ financial ratios, Financial statements (directly sourced from the SEC's XBRL data and up to 10y back; quarterly, H1 and 9M) ...


4

I would argue that indeed none of the so-called stylized facts you mentioned can be explained by classical economic theory. That there was a gross delta between the predictions of classical economic theory and empirical data was foremost found out by Benoit Mandelbrot as far back as 1963 in his seminal paper: The Variation of Certain Speculative Prices In ...


4

There is not a single 'interest-rate' to reduce, there are various interest rates in play. The central bank mandate is usually to control CPI or a similar measure of inflation (e.g. Bank of England's 2% inflation target for GBP). There are various tools for them to do this, including QE and setting the central bank rate. However, at the moment, the central ...


4

U.S. Government DID save American International Group (AIG) from bankruptcy, since it was considered too big to fail, actually: a lot of financial institutions were insured by AIG. This Investopedia page is a nice summary on the topic about AIG's bailout. Here (Investopedia again) about Lehman Brothers, that became really too much leveraged and exposed to ...


4

The general formula for conversion of "a to b" odds to a probability is $p=\frac{b}{a+b}$ http://www.calculatorsoup.com/calculators/games/odds.php So 8/15 remain implies remain with probability 0.652 8/4 for leave implies leave with probability 0.333 The amount 1-0.652-0.333 = 0.0145 represents the bid-ask spread or loss that you suffer (and the other ...


4

In most economic models the risk aversion coefficient is definitely related to the equity premium. Assuming utility is CRRA (as you mention): \begin{equation} U(C_t) = \frac{C_t^{1-\gamma}}{1-\gamma} \end{equation} Also assume the agent has access to an equity claim and risk free. So that his portfolio follows: $W_{t+1} = [\alpha_t R_{t+1} + (1-\alpha_t)...


4

Suppose markets are perfectly efficient and asset prices reflect all available information. Under this assumption one expects current prices to be non-biased estimators of future prices. It is a common mistake to think that market efficiency implies $P_t = E_t[P_{t+1}]$! In general, the correct statements are: $P_t = \frac{E_t^Q[P_{t+1}]}{R_f}$ where $Q$ ...


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The concept is similar, but the mechanics are slightly different. Making a quarterly payment based on 3-month Libor is fine, but making daily payments of the overnight rate is inconvenient (too much work in the back-office making and checking the payments), so a single payment is made at maturity (or on the annual anniversary of the swap's inception), based ...


3

The general effect of quantitative analysis of the markets is to enforce randomness. Suppose a strategic quant finds a predictable pattern where a stock always rises on Tuesdays. His institution will commence buying the stock every Monday, and selling on Tuesday. The trading itself pushes the stock price up on Monday and down on Tuesday (in general), so if ...


3

I think there is a slight misconception into the purpose of an economic theory. The market is a complex entity to be modeled and yes, it is neither efficient nor arbitrage free but it is trading and there is a price process that corresponds to the market one. You could say that classical economic theory has failed, but I would argue the idea of a theory is ...


3

Volatility changes over time. Even if daily returns are normal, assuming the conditional volatility each day is known, the unconditional distribution of daily returns will have excess kurtosis. For example, if daily returns have a standard deviation of 1%, 90% of the time, and a standard deviation of 3%, 10% of the time, the presence of the high-volatility 3%...


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Clearly the money markets are likely to freeze up in a crisis situation. They did exactly that in 2008. Specifically: A) people don't want to lend money unsecured to banks, so bank commercial paper goes below par in the market. B) understanding this , people try to liquidate money market funds containing bank cp at par, so a run develops on money market ...


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Put it simply, the interest rate depends on the forces of demand and supply of money. When the Fed buy bond, it increases the money supply into the economy. To induce the people to borrow more money bank reduces their own interest rate, otherwise, people won't have any incentives to borrow more. The interest rate is reduce to such level again equilibrium is ...


3

No, it is not possible for Tobin's Q to be negative in any normal situation. Mathematically it is true that if the 'short term assets' figure is very large (because of a data error or otherwise) the numerator of the fraction could become negative. To protect against this you might consider only the excess of short term liabilities over short term assets ...


3

We know that: \begin{equation} R_{t+1} = \frac{P_{t+1} + D_{t+1}}{P_t} \end{equation} After some algebra and taking logs we can write the returns as: \begin{equation} r_{t+1} = k + \rho (p_{t+1} - d_{t+1}) - (p_t - d_t) + \Delta d_{t+1} \end{equation} where is constant $\rho = \frac{P/D}{1+P/D}$. or: \begin{equation} (p_t - d_t) = k + \rho (p_{t+1} - ...


3

The cash flow news / discount rate news decomposition is given by $$r_{t+1}-\mathbb{E}_t[r_{t+1}]=(\mathbb{E}_{t+1}-\mathbb{E}_t)\sum_{j=0}^{\infty}\rho^j\Delta d_{t+1+j}-(\mathbb{E}_{t+1}-\mathbb{E}_t)\sum_{j=1}^{\infty}\rho^j\Delta r_{t+1+j},$$ where $r_{t}$ is log-return $d_{t}$ is log-dividend and $\rho$ is a constant. This follows directly from the ...


3

The answer to your question could fill an entire asset pricing text book. Your question mixes theory and empirics. A different way of looking at it is to look at the identity: $$ 1 = E[M_t R_t]$$ To generate a sufficient risk premium either you need to have the covariance of the SDF with the the return to be sufficiently high. Campbell and Cochrane basically ...


3

If we talk about tech stocks in general, a majority of their value is tied up in more distant cash flows / terminal value in a standard DCF analysis. So if interest rates go up, the more distant cash flows are impacted more due to the e^(-rt) discounting factor. The reason tech stocks are seen as 'expensive' is because the P/E ratio for example is measured ...


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CQG Inc. https://www.cqgdatafactory.com/ - historical bar and time sales data (ticks) https://develop.cqg.com/qd/?page=ContinuumDocumentation - api for getting realtime, historical data and trade routing.


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There is also a related question on the economics stack: https://economics.stackexchange.com/questions/4679/what-are-some-good-repositories-for-economic-data Answers from there: The American Economic Association has a list of resources for Economists, including a page for data. There you find links to many institutions that offer all kinds of data, as well ...


2

There are severa ways you could formulate this problem in game theoretic terms. Hoping this is not too basic an answer for you : from what you write, the two canonical approaches would be to frame things in terms of Cournot oligopolies (firms simultaneously set quantities and prices result from the market clearing condition supply=demand) or Bertrand ...


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What is meant is the so called Laffer effect or Laffer curve. The rationale is that when you cut taxes that this will stimulate business and thereby over-compensate the loss in taxes the government originally had.


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EDIT: Hi, I'm incredibly sorry. I'm archiving tendollardata.com and chartsonlygoup.com (link), as of April 1, 2021. All data will only be up to December 31, 2020. I feel compelled to be on a new mission now (link). All orders should have been refunded already. Quant StackExchange is the only place I've advertised my sites. There are many data services out ...


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It is the second derivative test. From your example: For $u'(w-px-L+x)-u'(w-px)=0$ to be at a maximum, we need \begin{eqnarray} &\frac{d}{dx}&\left[u'(w-px-L+x)-u'(w-px)\right]\\ &=&(1-p)u''(w-px-L+x)+pu''(w-px)<0. \end{eqnarray} For a risk averse individual, $u''(x)<0$ because of Jensen's Inequality, hence the condition is met. A ...


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