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Author: Wale Dare
Publisher:
ISBN:
Category :
Languages : en
Pages : 0
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Book Description
We propose a non-parametric procedure for estimating the realized spot volatility of a price process described by an Itô semimartingale with Lévy jumps. The procedure integrates threshold jump elimination technique of Mancini (2009) with a frame (Gabor) expansion of the realized trajectory of spot volatility. We show that the procedure converges in probability in L2([0; T]) for a wide class of spot volatility processes, including those with discontinuous paths. Our analysis assumes the time interval between price observations tends to zero; as a result, the intended application is for the analysis of high frequency financial data. We investigate practical tests of market efficiency that are not subject to the joint-hypothesis problem inherent in tests that require the specification of an equilibrium model of asset prices. The methodology we propose simplify the testing procedure considerably by reframing the market efficiency question into one about the existence of a local martingale measure. As a consequence, the need to directly verify the no dominance condition is completely avoided. We also investigate market efficiency in the large financial market setting with the introduction of notions of asymptotic no dominance and market efficiency that remain consistent with the small market theory. We obtain a change of numeraire characterization of asymptotic market efficiency and suggest empirical tests of inefficiency in large financial markets. We argue empirically that the U.S. treasury futures market is informational inefficient. We show that an intraday strategy based on the assumption of cointegrated treasury futures prices earns statistically significant excess return over the equally weighted portfolio of treasury futures. We also provide empirical backing for the claim that the same strategy, financed by taking a short position in the 2-Year treasury futures contract, gives rise to a statistical arbitrage.
Author: Wale Dare
Publisher:
ISBN:
Category :
Languages : en
Pages : 0
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Book Description
We propose a non-parametric procedure for estimating the realized spot volatility of a price process described by an Itô semimartingale with Lévy jumps. The procedure integrates threshold jump elimination technique of Mancini (2009) with a frame (Gabor) expansion of the realized trajectory of spot volatility. We show that the procedure converges in probability in L2([0; T]) for a wide class of spot volatility processes, including those with discontinuous paths. Our analysis assumes the time interval between price observations tends to zero; as a result, the intended application is for the analysis of high frequency financial data. We investigate practical tests of market efficiency that are not subject to the joint-hypothesis problem inherent in tests that require the specification of an equilibrium model of asset prices. The methodology we propose simplify the testing procedure considerably by reframing the market efficiency question into one about the existence of a local martingale measure. As a consequence, the need to directly verify the no dominance condition is completely avoided. We also investigate market efficiency in the large financial market setting with the introduction of notions of asymptotic no dominance and market efficiency that remain consistent with the small market theory. We obtain a change of numeraire characterization of asymptotic market efficiency and suggest empirical tests of inefficiency in large financial markets. We argue empirically that the U.S. treasury futures market is informational inefficient. We show that an intraday strategy based on the assumption of cointegrated treasury futures prices earns statistically significant excess return over the equally weighted portfolio of treasury futures. We also provide empirical backing for the claim that the same strategy, financed by taking a short position in the 2-Year treasury futures contract, gives rise to a statistical arbitrage.
Author: Aristides Romero
Publisher:
ISBN:
Category :
Languages : en
Pages :
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Book Description
As a basic principle in statistics, a larger sample size is preferred whenever possible. Nonetheless, in the financial world, especially equities and currencies trading, including all available data poses great challenges due to the noise present in the volatility estimation. In his paper I examine the Two Time Scales Realized Volatility estimator by Zhang, Mykland, and Ait-Sahalia (2005b) and I find that it not only provides a more efficient estimator than a basic estimator of the integrated volatility of returns, but it also consistently estimates the microstructure noise present in the latent efficient return process. I find that by using this approach, it is possible to compare the efficiency of the prices of securities with lower transaction costs traded against those with higher transactions costs.
Author: Changhyon Cho
Publisher:
ISBN:
Category : Financial futures
Languages : en
Pages : 360
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Book Description
Author: Cheng-Few Lee
Publisher: Springer
ISBN: 9781461477495
Category : Business & Economics
Languages : en
Pages : 0
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Book Description
The Handbook of Financial Econometrics and Statistics provides, in four volumes and over 100 chapters, a comprehensive overview of the primary methodologies in econometrics and statistics as applied to financial research. Including overviews of key concepts by the editors and in-depth contributions from leading scholars around the world, the Handbook is the definitive resource for both classic and cutting-edge theories, policies, and analytical techniques in the field. Volume 1 (Parts I and II) covers all of the essential theoretical and empirical approaches. Volumes 2, 3, and 4 feature contributed entries that showcase the application of financial econometrics and statistics to such topics as asset pricing, investment and portfolio research, option pricing, mutual funds, and financial accounting research. Throughout, the Handbook offers illustrative case examples and applications, worked equations, and extensive references, and includes both subject and author indices.
Author: Chien-Te Hsu
Publisher:
ISBN:
Category : Stocks
Languages : en
Pages : 48
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Book Description
Author: Terry A. Marsh
Publisher:
ISBN: 9781332272020
Category : Mathematics
Languages : en
Pages : 34
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Book Description
Excerpt from Nontrading, Market-Making, and Estimates of Stock Price Volatility Nontrading, Market-Making, and Estimates of Stock Price Volatility was written by Terry A. Marsh in 1985. This is a 28 page book, containing 6425 words and 2 pictures. Search Inside is enabled for this title. About the Publisher Forgotten Books publishes hundreds of thousands of rare and classic books. Find more at www.forgottenbooks.com This book is a reproduction of an important historical work. Forgotten Books uses state-of-the-art technology to digitally reconstruct the work, preserving the original format whilst repairing imperfections present in the aged copy. In rare cases, an imperfection in the original, such as a blemish or missing page, may be replicated in our edition. We do, however, repair the vast majority of imperfections successfully; any imperfections that remain are intentionally left to preserve the state of such historical works.
Author: Tim Bollerslev
Publisher:
ISBN:
Category : Dividends
Languages : en
Pages : 61
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Book Description
This paper provides a selective survey of the voluminous literature on tests for market efficiency. The ideas discussed include standard autocorrelation tests, multi-period regression tests and volatility tests. The formulation and estimation of models for time-varying volatility are also considered. Dependence in second-order moments plays an important role in implementing and understanding tests for market efficiency. All of the reported test statistics and model estimates are calculated with monthly data on value-weighted NYSE stock prices and dividends. The distributions of the test statistics under various alternatives, including fads and bubbles, are illustrated through the use of Monte Carlo methods. In addition to the standard constant discount rate present value model, we postulate and simulate a new fundamental price relationship that accounts for the time-varying uncertainty in the monthly dividend growth rates. Allowing the discount rate to be a function of the time-varying uncertainty in the dividend process results in a simulated fundamental price series that is broadly consistent with most of the sample statistics of the actual data.
Author: Jonathan Lewellen
Publisher:
ISBN:
Category :
Languages : en
Pages : 47
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Book Description
In asset pricing, estimation risk refers to investor uncertainty about the parameters of the return or cashflow process. We show that estimation risk can significantly affect the time-series and cross-sectional behavior of asset prices. In particular, parameter uncertainty will tend to induce price reversals and negative serial correlation in returns. Prices can violate familiar 'volatility bounds' when investors are rational. Cross-sectionally, expected returns deviate from the CAPM even if investors attempt to hold mean-variance efficient portfolios, and these deviations will be predictable based on past dividends, prices, and returns. In short, we argue that estimation risk is likely to be important for characterizing an efficient market.
Author: Jonathan Lewellen
Publisher:
ISBN:
Category :
Languages : en
Pages : 53
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Book Description
In asset pricing, estimation risk refers to investor uncertainty about the parameters of the return or cashflow process. We show that with estimation risk the observable properties of prices and returns can differ significantly from the properties perceived by rational investors. In particular, parameter uncertainty will tend to induce return predictability in ways that resemble irrational mispricing, and prices can violate familiar volatility bounds when investors are rational. Cross-sectionally, expected returns deviate from the CAPM even if investors attempt to hold mean-variance efficient portfolios, and these deviations can be predictable based on past dividends and prices. In short, estimation risk can be important for characterizing and testing market efficiency.
Author: Robert Ślepaczuk
Publisher: LAP Lambert Academic Publishing
ISBN: 9783844356939
Category :
Languages : en
Pages : 60
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Book Description
This paper focuses on volatility of financial markets, which is one of the most important issues in finance, especially with regards to modelling high-frequency data. Risk management, asset pricing and option valuation techniques are the areas where the concept of volatility estimators (consistent, unbiased and the most efficient) is of crucial concern. Our intention was to find the best estimator of true volatility taking into account the latest investigations in finance literature. Basing on the methodology presented in previous papers on volatility estimators, we computed the various model-free volatility estimators and compared them with classical volatility estimator. In order to reveal the information set hidden in high-frequency data, we utilized the concept of realized volatility and realized range. Calculating our estimator, we carefully focused on (the interval used in calculation), n (the memory of the process) and q (scaling factor). Our results revealed that the appropriate selection of and n plays the crucial role in estimator efficiency, as well as its accuracy...This work was supported by the Foundation for Polish Science."
