There are three fundamental ways of testing the validity of an investment algorithm against historical evidence: a) the walk-forward method; b) the resampling method; and c) the Monte Carlo method. By far the most common approach followed among academics and practitioners is the walk-forward...

We develop statistical methods to detect informed trading in options markets. We apply these methods to 31 companies from various sectors over 14 years analyzing approximately 9.6 million option prices. We find that option informed trading tends to cluster prior to certain events, takes place...

This appendix extends the empirical results in Chesney, Crameri, and Mancini (2011). Informed trading activities on put and call options are analyzed for 19 companies in the banking and insurance sectors from January 1996 to September 2009. Our empirical findings suggest that certain events such...

In this study we examine different methodologies to estimate earnings. More specifically, we evaluate the viability of Genetic Programming as both a forecasting model estimator and a forecast-combining methodology. When we compare the performance of traditional mechanical forecasting (ARIMA)...

Several exchanges in futures and options deploy pro-rata matching. The executed size of limit orders in pro-rata markets is never certain, unlike in price-time priority matching systems. This article derives the optimal size of limit orders in pro-rata markets given the trader's desired...

Motivated by the problems of the conventional model in rationalizing market data, we derive the equilibrium interest rate and risk premiums using recursive utility in a continuous time model. We consider the version of recursive utility which gives the most unambiguous separation of risk...

When assets' expected returns follow a factor structure subject to pricing errors, we show that the mean-variance portfolio can be used to obtain a set of implied factor risk premia. Contrary to the instability of the mean-variance asset portfolio, we show that such implied factor risk premia...