Much of the trading activity in Equity markets is directed to brokerage houses. In exchange they provide so-called quot;soft dollarsquot; which basically are amounts spent in quot;researchquot; for identifying profitable trading opportunities. Soft dollars represent about USD 1 out of every USD...

Structural equation models have been around for now a long time. They are intensively used to analyze data from di.erent fields such as psychology, social sciences, economics, management, etc. Their estimation can be performed using standard statistical packages such as LISREL. However, these...

In this paper we develop a structural equation model with latent variables in an ordinal setting which allows us to test broker-dealer predictive ability of financial market movements. We use a multivariate logit model in a latent factor framework, develop a tractable estimator based on a...

Generalized linear latent variable models (GLLVMs), as defined by Bartholomew and Knott, enable modeling of relationships between manifest and latent variables. They extend structural equation modeling techniques, which are powerful tools in the social sciences. However, because of the...

Many numerical methods to price options have been suggested in the finance literature. This paper aims at reviewing several numerical approaches in order to discuss their practical strenghts and/or weaknesses. The problem under investigation is a multivariate contingent claims model with three...

Evolutionary algorithms are not new and have been developed, both their concepts and framework, since around the 1950's based on the idea that the evolutionary process could be used as a general-purpose optimization tool. The goal of this paper is to propose an alternative to classical...

We conduct a laboratory experiment to study whether people in-tuitively use real-option strategies in a dynamic investment setting.The participants were asked to play as an oil manager and make pro-duction decisions in response to a simulated mean-reverting oil price.Using cluster analysis,...

This paper develops a liquidity measure tailored to the foreign exchange (FX) market, quanties the amount of commonality in liquidity across dierent exchange rates, and determines theextent of liquidity risk premiums embedded in FX returns. The new liquidity measure utilizesultra high frequency...

This paper reviews important concepts and methods that are useful for hypothesis testing.First, we discuss the Neyman-Pearson framework. Various approaches to optimalityare presented, including finite-sample and large-sample optimality. Then, some of the mostimportant methods are summarized, as...