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Fast trading and the virtue of entropy : evidence from the foreign exchange market

Corsetti, Giancarlo; Lafarguette, Romain; Mehl, Arnaud - 2019

Focusing on the foreign exchange reaction to macroeconomic announcements, we show that fast trading is positively and significantly correlated with the entropy of the distribution of quoted prices in reaction to news: a larger share of fast trading increases the degree of diversity of quotes in...

Persistent link: https://www.econbiz.de/10012037341

Forecasting stock market volatility and the informational efficiency of the DAX-index options market

Claessen, Holger; Mittnik, Stefan - 2002

Alternative strategies for predicting stock market volatility are examined. In out-of-sample forecasting experiments implied-volatility information, derived from contemporaneously observed option prices or history-based volatility predictors, such as GARCH models, are investigated, to determine...

Persistent link: https://www.econbiz.de/10009767118

Knightian uncertainty and credit cycles

Gerba, Eddie; Żochowski, Dawid - 2017

The Great Recession has been characterised by the two stylized facts: the buildup of leverage in the household sector in the period preceding the recession and a protracted economic recovery that followed. We attempt to explain these two facts as an information friction, whereby agents are...

Persistent link: https://www.econbiz.de/10011656163

Risk Aversion : Differential Conditions for the Concavity in Transformed Two-Parameter Distributions

Corradin, Fausto; Sartore, Domenico - 2016

The condition of Risk Aversion implies that the Utility Function must be concave. Taking into account the dependence of the Utility Function on the wealth that in turn depends on the return, we consider a return with any type of two-parameter distribution. It is possible to define Risk and...

Persistent link: https://www.econbiz.de/10014124383

Risks versus Mispricing : Decomposing Asset pricing Anomalies via Classification

Han, Xiao - 2021

I use classification-based machine-learning methods to decompose 32 anomaly payoffsinto risk exposures and mispricing. The component driven by risk earns statistically insignificantreturns, despite its efficacy in explaining the time-series variation in anomaly payoffs.The mispricing component...

Persistent link: https://www.econbiz.de/10013251341

Uncertainty and Sectoral Shifts : The Interaction between Firm-Level and Aggregate-Level Shocks, and Macroeconomic Activity

Kalay, Alon - 2016

portion of shocks to macroeconomic activity. Specifically, we hypothesize that the relation between uncertainty and economic … growth is most pronounced when both firm-level and aggregate level uncertainty are high simultaneously. Similarly, we …

Persistent link: https://www.econbiz.de/10012998062

Macropudential Policy in a Knightian Uncertainty Model with Credit-, Risk-, and Leverage Cycles

Gerba, Eddie - 2016

We attempt to explain two stylized facts of the Great Recession, namely the build-up of high leverage in the household sector in the boom phase, deep busts and protracted recovery as rare systemic events. We extend Boz and Mendoza (2014) by explicitly modeling the credit markets and modifying...

Persistent link: https://www.econbiz.de/10013003984

Portfolio Performance Under Reference-Day Risk

Gonzalez, Marcelo - 2017

Reference-day risk has been previously identified as a type of sampling variation phenomenon, and its effect on the estimation of stock returns and their volatility and market betas have been documented. Using a dataset of daily equity mutual fund returns, we extend previous studies to analyze...

Persistent link: https://www.econbiz.de/10012968627

Monetary Policy Uncertainty and the Market Reaction to Macroeconomic News

Kurov, Alexander - 2017

We examine whether monetary policy uncertainty influences the reaction of the equity, Treasury security, foreign … futures data, we show that in the presence of higher policy uncertainty the response to macroeconomic news weakens in the … elevated monetary policy uncertainty, macroeconomic announcements impact the financial and crude oil markets to a large extent …

Persistent link: https://www.econbiz.de/10012969346

Basis Risk in Hedging a CDS Portfolio with Credit Indices

Chamizo, Alvaro - 2017

The financial crisis has raised concerns throughout the industry on the possibility that hedging credit valuation adjustment (CVA) might become increasingly difficult should the long-standing correlation between singlename and index CDS products break down. So, we provide an estimation of the...

Persistent link: https://www.econbiz.de/10012970402