Questions tagged [statistical-finance]
Statistical finance, which is also called 'econophysics' is the application of statistical tools to the study of financial markets data.
183 questions
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Volatility of Hedging Error and Statistical Uncertainty of Estimates
In The Volatility Smile book by Derman & Miller at pag. 113, I don't understand the statistical uncertainty in the measurements of volatility and how to interpret the notation.
The authors state ...
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Advice on pattern mining python script
I'm looking for advice on the approach of this type of scan/search. I've built a number of code blocks that look at relatively simple aspects like price changes over time, volatility, volume, various ...
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What is a robust estimator of stock return mean?
I recently started a mathematical statistics course and learned that the sample mean assumes the set of samples $ X_1, X_2, \dots, X_n $ to be i.i.d. With stock returns, this is clearly not the case, ...
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Identifying Stochastic Processes in Financial Data: Is There a Standard Approach?
In many theoretical models in mathematical finance, certain processes are assumed to follow specific stochastic dynamics. For example, order flow might be modeled using an Ornstein-Uhlenbeck (OU) ...
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Statistical factors: stability over time
I have an asset returns matrix of shape (n, t) with n assets and t days, n > t. I perform SVD decomposition of the matrix into c factors, getting a (c, t) shaped matrix of factor returns.
This ...
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Question about the "VolZScore" in this article about applying the Boids algorith to equities to find flocking behavior
In this article, "Flocking behavior of US equities":
https://www.cs.dartmouth.edu/~lorenzo/teaching/cs174/Archive/Winter2013/Projects/FinalReportWriteup/ira.r.jenkins.gr/final.html
They use ...
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Why do ATM options intuitively have higher Time Value (Extrinsic Value) than Out- and In-The-Money options?
I'm trying to get some intuition concerning the Black Sholes Formula and in doing so I've come across these graphs:
Trying to understand the intrinsic value relationship with Options Value was ...
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Combination of factors
Let's say I have 10 factors and I want to find a combination (basically sum of exposures) of factors (of any length) from this set which has max sharpe. Is there an easy way to find this out rather ...
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Fama-French Regression Output Interpretation (Intercept/Alpha)
I am currently doing a report regarding Fama and French 3 and 5 factors model. I was provided 3 companies with each of its daily stock return from 2015-2020, and the values of all 5 factors during ...
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How to calculate VaR given mean and sd?
Sarah manages a hedge fund with a portfolio valued at \$2,000,000. The portfolio's daily returns have a standard deviation of \$3,000 and an average daily return of \$1,200. Calculate the five-day VAR ...
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Statistical Arbitrage, Avellaneda & Lee - Estimation of the Residual Process
I am trying to calculate the trade signal outlined in Avellaneda & Lee paper "Statistical Arbitrage in the US Equities Market".
They describe their approach in appendix. Here is my ...
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Fama Macbeth Regression: Culture and Momentum
I am attempting to replicate the work from "Individualism and Momentum around the World" (Shui, Titman, Wei, 2010, link) but I am not sure how to run a Fama Macbeth regression where the ...
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Can i use cross sectional absolute deviation to detect whether or not there is herding behavior in one specific year IPO
If I want to measure herding behavior of one specific year IPO, can I only use the initial return of every IPO stocks in that specific year for the CSAD regression?
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Advances in financial machine learning (Marcos López de Prado): explanation of snippet 3.1
I have been reading AFML ( Marcos López de Prado
) and I am having trouble understanding snippet 3.1 which provides the following code:
...
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What color financial time series are there?
There is a folklore white noise hypothesis related to (and equivalent to some forms of) the efficient market hypothesis in finance -see references below. But are there some asset pairs whose return ...
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