Correlations of financial asset returns play a central role in designing investment portfolios by using Markowitz's modern portfolio theory (MPT). Correlations are calculated from asset prices that happen at various trading time intervals. Therefore, trading frequency dictates correlation...

This paper revisits volatility and emphasizes interrelationships of risk metrics at various time horizons expressed in multiple frequencies. The basic price model defined by Black-Scholes equation and its extensions for varying variance scenarios are presented, i.e. Heston and GARCH models....

Portfolio risk, introduced by Markowitz in 1952, and defined as the standard deviation of the portfolio return, is an important metric in the Modern Portfolio Theory (MPT). A popular method for portfolio selection is to manage the risk and return of a portfolio according to the...

Constant modulus transforms like discrete Fourier transform (DFT), Walsh transform, and Gold codes have been successfully used over several decades in several engineering applications, including discrete multi-tone (DMT), orthogonal frequency division multiplexing (OFDM) and code division...

We use facial emotion recognition software to quantify CEO mood. Anger or disgust motivates a CEO to work harder to improve his/her situation thus firm profitability improves in the subsequent quarter. Happy CEOs are less likely to work on hard or unpleasant tasks thus profitability decreases in...

In this paper, the eigendecomposition of a Toeplitz matrix populated by an exponential function in order to model empirical correlations of US equity returns is investigated. The closed-form expressions for eigenvalues and eigenvectors of such a matrix are available. These eigenvectors are used...

This paper discusses portfolio construction for investing in N given assets, e.g. constituents of the Dow Jones Industrial Average (DJIA) or large cap stocks, which is based on partitioning the investment universe into clusters. The clusters are determined from the trailing correlation matrix...