We investigate the direct connection between the uncertainty related to estimated stable ratios of stock prices and risk and return of two pairs trading strategies: a conditional statistical arbitrage method and an implicit arbitrage one. A simulation-based Bayesian procedure is introduced for...

We propose a novel estimation procedure of bid-ask spreads from open, high, low, and close prices. Our estimator is asymptotically unbiased and optimally combines the full set of price data to minimize the estimation variance. When quote data are not available, our estimator generally delivers...

Implied expected returns are the expected returns for which a supposedly mean-variance efficient portfolio is effectively efficient given a covariance matrix. We analyze the statistical properties of monthly implied expected return estimates and study their sensitivity to the choice of a...

We propose a tone-based event study to reveal the aggregate abnormal tone dynamics in media articles around earnings announcements. We test whether they convey incremental information that is useful for price discovery for non financial S&P 500 firms. The positive relationship found between the...

Various GARCH models are applied to daily returns of more than 1200 constituents of major stock indices worldwide. The value-at-risk forecast performance is investigated for different markets and industries, considering the test for correct conditional coverage using the false discovery rate...