Posts Tagged ‘Equity


Gráfico du Jour: Acciones de US y su tasa de crecimiento

(Fuente, via FT Aphaville)


Paper: HF Data y Modelos de estimación

The Information Content of High-Frequency Data for Estimating Equity Return Models and Forecasting Risk

We demonstrate that the parameters controlling skewness and kurtosis in popular equity return models estimated at daily frequency can be obtained almost as precisely as if volatility is observable by simply incorporating the strong information content of realized volatility measures extracted from high-frequency data. For this purpose, we introduce asymptotically exact volatility measurement equations in state space form and propose a Bayesian estimation approach. Our highly efficient estimates lead in turn to substantial gains for forecasting various risk measures at horizons ranging from a few days to a few months ahead when taking also into account parameter uncertainty. As a practical rule of thumb, we find that two years of high frequency data often suffice to obtain the same level of precision as twenty years of daily data, thereby making our approach particularly useful in finance applications where only short data samples are available or economically meaningful to use. Moreover, we find that compared to model inference without high-frequency data, our approach largely eliminates underestimation of risk during bad times or overestimation of risk during good times. We assess the attainable improvements in VaR forecast accuracy on simulated data and provide an empirical illustration on stock returns during the financial crisis of 2007-2008.
Link al Paper


Paper: patrones, retornos, y acciones

Are You Trading Predictably?

Over the post-decimalization period, we find a predictable pattern of return continuation in equities. Stocks whose relative returns are high in a given half-hour interval today tend to exhibit similar outperformance in the same half-hour period on subsequent days. The effect is stronger at the beginning and end of the trading day, but exists throughout the day. Percentage changes in trading volume exhibit a similar pattern, but do not explain the return pattern. These results suggest that strategically shifting the timing of trades can significantly reduce execution costs for institutional traders.

Link al Paper


Paper: Style Momentum

Cross-Asset Style Momentum

This paper reports significant momentum profits among style portfolios of multiple asset classes. Previous studies have demonstrated style momentum within equity markets. The findings of this paper reveal that style momentum is not merely an equity market phenomenon, but a cross-asset phenomenon. This paper also presents a new assessment of alternative theories of momentum. Using the framework previously established by Lewellen (2002), the results of this paper show that cross-asset style momentum profits are consistent with the underreaction hypothesis, but not with the excess comovement theory of Lewellen (2002) or the style investing theory of Barberis and Shleifer (2003).

Link al Paper


Impacto de las tasas

La siguiente cita pertenece a un post de Trader´s Narrative -realizado por Wayne Whaley- sobre el impacto de las tasas de interes sobre  los precios futuros del equity:

This concept is based on the generally accepted principle that interest bearing securities are the primary source of competition for equity investment dollars. Higher expected returns for one investment, reduces the appeal of its primary alternative. Also, the cost of borrowing money has an influence on the expense of doing business for many companies, such as banks and utilities. The expectation of any changes in future earnings is a primary driving force in determining the appeal of equities.

In theory, this accepted relationship would always hold true, if all other market forces were held constant. But since rate changes can be symptomatic of other underlying factors that impact the direction of equity earnings, it begs the question, “When does the basic interest rate to equity relationship not apply?” And in regard to the current market, “What should one expect for the equity markets when rates begin to rise from the current extremely low levels?”

Link a la nota.

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"It is hard to be finite upon an infinite subject, and all subjects are infinite." Herman Melville

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