arXiv · arXiv · 2025
Classical correlation and rolling PCA summarize market dependence through covariance spectra, but they do not provide a unified operator representation for entropy, purity-based mixing, and standardized structural deviations built from rolling multi-feature trajectories. We propose the Quantum Network of Assets (QNA), a quantum-inspired but non-physical density-operator framework in which normalized asset-level state…
Hui Gong, Akash Sedai, Francesca Medda
OpenAlex · Journal of Applied Econometrics · 2007 · cites 12575
Abstract A number of panel unit root tests that allow for cross‐section dependence have been proposed in the literature that use orthogonalization type procedures to asymptotically eliminate the cross‐dependence of the series before standard panel unit root tests are applied to the transformed series. In this paper we propose a simple alternative where the standard augmented Dickey–Fuller (ADF) regressions are augmen…
M. Hashem Pesaran
arXiv · arXiv · 2026
This paper develops an observed-data likelihood for applying moving-aggregate modified autoregressive (MAGMAR) copula time-series models to discrete sovereign rating-migration counts with time-varying exposure. An annual count identifies a probability-integral-transform interval rather than a unique latent point, so the likelihood integrates the latent process over the complete sequence of count intervals. A guided s…
Marina Palaisti
arXiv · arXiv · 2025
In the online portfolio optimization framework, existing learning algorithms generate strategies that yield significantly poorer cumulative wealth compared to the best constant rebalancing portfolio in hindsight, despite being consistent in asymptotic growth rate. While this unappealing performance can be improved by incorporating more side information, it raises difficulties in feature selection and high-dimensional…
Duy Khanh Lam
arXiv · arXiv · 2025
By capturing outliers, volatility clustering, and tail dependence in the asset return distribution, we build a sophisticated model to predict the downside risk of the global financial market. We further develop a dynamic regime switching model that can forecast real-time risk regime of the market. Our GARCH-DCC-Copula risk model can significantly improve both risk- and alpha-based global tactical asset allocation str…
Yin Luo, Sheng Wang, Javed Jussa
arXiv · arXiv · 2025
Accurately identifying the extremal dependence structure in multivariate heavy-tailed data is a fundamental yet challenging task, particularly in financial applications. Following a recently proposed bootstrap-based testing procedure, we apply the methodology to absolute log returns of U.S. S&P 500 and Chinese A-share stocks over a time period well before the U.S. election in 2024. The procedure reveals more isolated…
Qian Hui, Sidney I. Resnick, Tiandong Wang
arXiv · arXiv · 2025
This paper investigates the investment problem of constructing an optimal no-short sequential portfolio strategy in a market with a latent dependence structure between asset prices and partly unobservable side information, which is often high-dimensional. The results demonstrate that a dynamic strategy, which forms a portfolio based on perfect knowledge of the dependence structure and full market information over tim…
Duy Khanh Lam
arXiv · arXiv · 2024
This review considers the Universities Superannuation Scheme (USS) valuations from 2014 to 2023. USS is a 70-80 billion GBP Defined Benefit pension scheme with over 500,000 members who are employed (or have been employed) at around 70 UK universities. Disputes over USS have led to a decade of industrial action. New results are presented showing the high dependence of USS pension contributions on the return from UK go…
Jackie Grant
arXiv · arXiv · 2022
Neural networks are suggested for learning a map from $d$-dimensional samples with any underlying dependence structure to multivariate uniformity in $d'$ dimensions. This map, termed DecoupleNet, is used for dependence model assessment and selection. If the data-generating dependence model was known, and if it was among the few analytically tractable ones, one such transformation for $d'=d$ is Rosenblatt's transform.…
Marius Hofert, Avinash Prasad, Mu Zhu
arXiv · arXiv · 2020
In this paper we estimate the conditional value-at-risk by fitting different multivariate parametric models capturing some stylized facts about multivariate financial time series of equity returns: heavy tails, negative skew, asymmetric dependence, and volatility clustering. While the volatility clustering effect is got by AR-GARCH dynamics of the GJR type, the other stylized facts are captured through non-Gaussian m…
Michele Leonardo Bianchi, Giovanni De Luca, Giorgia Rivieccio
arXiv · arXiv · 2020
A perspective is taken on the intangible complexity of economic and social systems by investigating the underlying dynamical processes that produce, store and transmit information in financial time series in terms of the \textit{moving average cluster entropy}. An extensive analysis has evidenced market and horizon dependence of the \textit{moving average cluster entropy} in real world financial assets. The origin of…
Pietro Murialdo, Linda Ponta, Anna Carbone
arXiv · arXiv · 2019
We demonstrate that the tail dependence should always be taken into account as a proxy for systematic risk of loss for investments. We provide the clear statistical evidence of that the structure of investment portfolios on a regulated market should be adjusted to the price of gold. Our finding suggests that the active bartering of oil for goods would prevent collapsing the national market facing international sancti…
Abootaleb Shirvani, Dimitri Volchenkov
arXiv · arXiv · 2019
This paper considers an often forgotten relationship, the time delay between a cause and its effect in economies and finance. We treat the case of Foreign Direct Investment (FDI) and economic growth, - measured through a country Gross Domestic Product (GDP). The pertinent data refers to 43 countries, over 1970-2015, - for a total of 4278 observations. When countries are grouped according to the Inequality-Adjusted Hu…
Marcel Ausloos, Ali Eskandary, Parmjit Kaur, Gurjeet Dhesi
arXiv · arXiv · 2016
This paper examines quantile dependence between international stock markets and evaluates its use for improving volatility forecasting. First, we analyze quantile dependence and directional predictability between the US stock market and stock markets in the UK, Germany, France and Japan. We use the cross-quantilogram, which is a correlation statistic of quantile hit processes. The detailed dependence between stock ma…
Heejoon Han
arXiv · arXiv · 2015
We use bank-level balance sheet data from 2005 to 2010 to study interactions within the banking system of five emerging countries: Argentina, Brazil, Mexico, South Africa, and Taiwan. For each country we construct a financial network based on the leverage ratio dependence between each pair of banks, and find results that are comparable across countries. Banks present a variety of leverage ratio behaviors. This levera…
Diego Aparicio, Daniel Fraiman
arXiv · arXiv · 2014
Currency carry trade is the investment strategy that involves selling low interest rate currencies in order to purchase higher interest rate currencies, thus profiting from the interest rate differentials. This is a well known financial puzzle to explain, since assuming foreign exchange risk is uninhibited and the markets have rational risk-neutral investors, then one would not expect profits from such strategies. Th…
Matthew Ames, Gareth W. Peters, Guillaume Bagnarosa, Ioannis Kosmidis
arXiv · arXiv · 2013
The currency carry trade is the investment strategy that involves selling low interest rate currencies in order to purchase higher interest rate currencies, thus profiting from the interest rate differentials. This is a well known financial puzzle to explain, since assuming foreign exchange risk is uninhibited and the markets have rational risk-neutral investors, then one would not expect profits from such strategies…
Matthew Ames, Guillaume Bagnarosa, Gareth W. Peters
arXiv · arXiv · 2008
In this manuscript, we analytically and numerically study statistical properties of an heteroskedastic process based on the celebrated ARCH generator of random variables whose variance is defined by a memory of $q_{m}$-exponencial, form ($e_{q_{m}=1}^{x}=e^{x}$). Specifically, we inspect the self-correlation function of squared random variables as well as the kurtosis. In addition, by numerical procedures, we infer t…
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