We show that applying the wavelet transform to S\&P 500 constituents' prices generates a substantial increase in the returns of the pairs-trading strategy. Pairs trading strategy is based on finding prices that move together, but if there is shared noise in the asset prices, the co-movement, on...

For many assets, trading is fragmented across multiple exchanges. Price discovery measures summarize the informativeness of trading on each venue for discovering the assetś true underlying value. We explore intraday variation in price discovery using a structural model with time-varying...

This paper revisits the fractional cointegrating relationship between ex-ante implied volatility and ex-post realized volatility. We argue that the concept of corridor implied volatility (CIV) should be used instead of the popular model-free option-implied volatility (MFIV) when assessing the...

This paper revisits the fractional co-integrating relationship between ex-ante implied volatility and ex-post realized volatility. Previous studies on stock index options have found biases and inefficiencies in implied volatility as a forecast of future volatility. It is argued that the concept...

This paper sheds new light on the mutual relationship between investor sentiment and excess returns corresponding to the bubble component of stock prices. We propose to use the wavelet concept of the phase angle to determine the lead-lag relation between these variables. The wavelet phase angle...

Event studies (ESs) can be applied to evaluate the impact of new regulations on the value of listed firms. However, regulatory changes are preceded by consultation processes and anticipations to the shareholders, which make it difficult to determine the exact timing of stock price response and...

This paper examines the ability of different GARCH models to forecast stock return volatility under a range of forecast metrics, including both statistical and economic evaluation. In particular, we are interested in whether wavelet de-noising of the data prior to estimation affects the ability...

This study seeks to examine the behaviour of subsequent trading activity in international stock markets. We investigate whether stock returns can explain subsequent trading using wavelet time-scaled returns and volume. A wavelet decomposition of trading volume over time-scales of up to 32 days...

Forecasting Realized Volatility (RV) is of paramount importance for both academics andpractitioners. During recent decades, academic literature has made substantial progressboth in terms of methods and predictors under consideration. Despite the popularity oftechnical indicators, there has been...

Conventional tests of present-value models over-reject the null of no predictability. In order to better account for the intrinsic probability of detecting predictive relations by chance alone, we develop a new nonparametric Monte Carlo testing method, which does not rely on distributional...