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Bartiromo, Rosario - In: Quantitative Finance 11 (2011) 2, pp. 229-235

In this paper we exploit the principle of maximum entropy to gain insight into the process underlying the internal dynamics of a stock market. We first introduce a simplified physical model, the ideally liquid stock, to describe market price evolution and derive an operational definition of...

Persistent link: https://www.econbiz.de/10009214981

Mori, S.; Kitsukawa, K.; Hisakado, M. - In: Quantitative Finance 11 (2010) 3, pp. 391-405

This paper generalizes Moody's correlated binomial default distribution for homogeneous (exchangeable) credit portfolios, which was introduced by Witt, to the case of inhomogeneous portfolios. We consider two cases of inhomogeneous portfolios. In the first case, we treat a portfolio whose assets...

Persistent link: https://www.econbiz.de/10009215042

When do improved covariance matrix estimators enhance portfolio optimization? An empirical comparative study of nine estimators

Pantaleo, Ester; Tumminello, Michele; Lillo, Fabrizio; … - In: Quantitative Finance 11 (2011) 7, pp. 1067-1080

The use of improved covariance matrix estimators as an alternative to the sample estimator is considered an important approach for enhancing portfolio optimization. Here we empirically compare the performance of nine improved covariance estimation procedures using daily returns of 90 highly...

Persistent link: https://www.econbiz.de/10009208266

Econophysics review: I. Empirical facts

Chakraborti, Anirban; Toke, Ioane Muni; Patriarca, Marco; … - In: Quantitative Finance 11 (2011) 7, pp. 991-1012

under the term Econophysics. Since the name was coined in 1995 by merging the words 'Economics' and 'Physics', this new …, Mathematics, Economics and Finance that led to the emergence of Econophysics. We then present empirical studies revealing the … random matrix theory and graph theory are presented. The companion paper will review models in Econophysics from the point of …

Persistent link: https://www.econbiz.de/10009208270

Econophysics review: II. Agent-based models

Chakraborti, Anirban; Toke, Ioane Muni; Patriarca, Marco; … - In: Quantitative Finance 11 (2011) 7, pp. 1013-1041

heading Econophysics. In the first part, we reviewed the statistical properties of financial time series, the statistics … models in Econophysics from the point of view of agent-based modeling. Of the large number of multi-agent-based models, we …

Persistent link: https://www.econbiz.de/10009208355

The Epps effect revisited

Toth, Bence; Kertesz, Janos - In: Quantitative Finance 9 (2009) 7, pp. 793-802

We analyse the dependence of stock return cross-correlations on the data sampling frequency, known as the Epps effect: for high-resolution data the cross-correlations are significantly smaller than their asymptotic value as observed for daily data. The former description implies that a changing...

Persistent link: https://www.econbiz.de/10008466739

Diffusive behavior and the modeling of characteristic times in limit order executions

Eisler, Zoltan; Kertesz, Janos; Lillo, Fabrizio; … - In: Quantitative Finance 9 (2009) 5, pp. 547-563

We present an empirical study of the first passage time (FPT) of order book prices needed to observe a prescribed price change Δ, the time to fill (TTF) for executed limit orders and the time to cancel (TTC) for canceled orders in a double auction market. We find that the distribution of all...

Persistent link: https://www.econbiz.de/10004966872

Non-parametric determination of real-time lag structure between two time series: the 'optimal thermal causal path' method

Sornette, Didier; Zhou, Wei-Xing - In: Quantitative Finance 5 (2005) 6, pp. 577-591

We introduce a novel non-parametric methodology to test for the dynamical time evolution of the lag-lead structure between two arbitrary time series. The method consists of constructing a distance matrix based on the matching of all sample data pairs between the two time series. Then, the...

Persistent link: https://www.econbiz.de/10005495734

Detecting log-periodicity in a regime-switching model of stock returns

Chang, George; Feigenbaum, James - In: Quantitative Finance 8 (2008) 7, pp. 723-738

Log-periodic precursors have been identified before most and perhaps all financial crashes of the Twentieth Century, but efforts to statistically validate the leading model of log-periodicity, the Johansen-Ledoit-Sornette (JLS) model, have generally failed. The main feature of this model is that...

Persistent link: https://www.econbiz.de/10005495756

Power mapping with dynamical adjustment for improved portfolio optimization

Schafer, Rudi; Nilsson, Nils Fredrik; Guhr, Thomas - In: Quantitative Finance 10 (2010) 1, pp. 107-119

For financial risk management it is of vital interest to have good estimates for the correlations between the stocks. It has been found that the correlations obtained from historical data are covered by a considerable amount of noise, which leads to a substantial error in the estimation of the...

Persistent link: https://www.econbiz.de/10008609617