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Equity auctions display several distinctive characteristics in contrast to continuous trading. As the auction time approaches, the rate of events accelerates causing a substantial liquidity buildup around the indicative price. This, in turn, results in a reduced price impact and decreased volatility of the indicative price. In this study, we adapt the latent/revealed order book framework to the specifics of equity au…
In response to growing demand for resilient and transparent financial instruments, we introduce a novel framework for replicating private equity (PE) performance using liquid, AI-enhanced strategies. Despite historically delivering robust returns, private equity's inherent illiquidity and lack of transparency raise significant concerns regarding investor trust and systemic stability, particularly in periods of height…
In this paper we develop structural first passage models (AT1P and SBTV) with time-varying volatility and characterized by high tractability, moving from the original work of Brigo and Tarenghi (2004, 2005) [19] [20] and Brigo and Morini (2006)[15]. The models can be calibrated exactly to credit spreads using efficient closed-form formulas for default probabilities. Default events are caused by the value of the firm …
This study investigates whether regime-dependent volatility forecasting and machine-learning-based return prediction can be jointly integrated to improve both statistical forecasting performance and economic strategy outcomes in equity markets. Using high-frequency CSI 300 Index data from 2005 to 2023, a sequential twostage framework is developed. In the first stage, realized volatility is modeled using regime-augmen…
The primary objective of this study was to examine the impact of the US sovereign credit rating downgrade on its equity market. Utilizing the event study methodology, a sample of three most capitalized listed companies -- Microsoft, Apple, and Amazon -- and the equity market index -- S&P500 -- were used as the proxy for the overall equity market. Three market models were constructed within the estimation window to de…
The time proximity of trades across stocks reveals interesting topological structures of the equity market in the United States. In this article, we investigate how such concurrent cross-stock trading behaviors, which we denote as co-trading, shape the market structures and affect stock price co-movements. By leveraging a co-trading-based pairwise similarity measure, we propose a novel method to construct dynamic net…
In this paper we address three main objections of behavioral finance to the theory of rational finance, considered as anomalies the theory of rational finance cannot explain: Predictability of asset returns, The Equity Premium, (The Volatility Puzzle. We offer resolutions of those objections within the rational finance. We do not claim that those are the only possible explanations of the anomalies, but offer statisti…
Using a proprietary dataset of meta-orders and prediction signals, and assuming a quasi-linear impact model, we deconvolve market impact from past correlated trades and a predictable return component to elicit the temporal dependence of the market impact of a single daily meta-order, over a ten day horizon in various equity markets. We find that the impact of single meta-orders is to a first approximation universal a…
This paper attempts to explain the credit default swap (CDS) premium, using a novel approach to identify the volatility and jump risks of individual firms from high-frequency equity prices. Our empirical results suggest that the volatility risk alone predicts 48% of the variation in CDS spread levels, whereas the jump risk alone forecasts 19%. After controlling for credit ratings, macroeconomic conditions, and firms'…
We postulates, and then show experimentally, that liquidity deficit is the driving force of the markets. In the first part of the paper a kinematic of liquidity deficit is developed. The calculus-like approach, which is based on Radon--Nikodym derivatives and their generalization, allows us to calculate important characteristics of observable market dynamics. In the second part of the paper this calculus is used in a…
This paper introduces a new risk-on risk-off strategy for the stock market, which combines a financial stress indicator with a sentiment analysis done by ChatGPT reading and interpreting Bloomberg daily market summaries. Forecasts of market stress derived from volatility and credit spreads are enhanced when combined with the financial news sentiment derived from GPT-4. As a result, the strategy shows improved perform…
Generating synthetic financial time series that preserve the statistical properties of real market data is essential for stress testing, risk model validation, and scenario design. Existing approaches struggle to simultaneously reproduce heavy-tailed distributions, negligible linear autocorrelation, and persistent volatility clustering. We developed a hybrid hidden Markov framework that discretized excess growth rate…
Introduction 2. Monetary policy and equity markets: conceptual issues and data 1 3. Overall stock market reaction to monetary policy 1 4. Industry effects, the credit channel and Tobin's q 1 4.1 Industry-specific effects 1 4.2 Firm-specific effects 1 5. Propensity score matching 2 5.1 Algorithm of propensity score matching 2 5.2 Empirical results 2 6. Conclusions
This study examines active liquidity management by Indian open-ended equity mutual funds. We find that fund managers respond to inflows by increasing cash holdings, which are later used to purchase less-liquid stocks at favourable valuations. Funds with less liquid portfolios tend to maintain larger cash reserves to manage flows. Funds that make active liquidity choices yield statistically and economically significan…
We introduce the Historical and Dynamic Volatility Ratios (HVR/DVR) and show that equity and index volatilities are cointegrated at intraday and daily horizons. This allows us to construct a VECM to forecast portfolio volatility by exploiting volatility cointegration. On S&P 500 data, HVR is generally stationary and cointegration with the index is frequent; the VECM implementation yields substantially lower mean abso…
Unlike developed market, some emerging markets are dominated by retail and unprofessional trading. China A share market is a good and fitting example in last 20 years. Meanwhile, lots of research show professional investor in China A share market continuously generate excess return compare with total market index. Specifically, this excess return mostly come from stock selectivity ability instead of market timing. Ho…
The accumulation of trading experience and empirical evidence since the original Black-Scholes (BS) model was developed, have made it increasingly evident that volatility is not a constant parameter, as BS assumed, but stochastic. With a second random factor associated with volatility affecting security returns, it would not be surprising if investors cared about bearing risk related to that factor. And there is cons…
A new modelling approach that directly prescribes dynamics to the term structure of VIX futures is proposed in this paper. The approach is motivated by the tractability enjoyed by models that directly prescribe dynamics to the VIX, practices observed in interest-rate modelling, and the desire to develop a platform to better understand VIX option implied volatilities. The main contribution of the paper is the derivati…
KBW Bank Index tracks the equity performance of major U.S. banks and provides insight into banking-sector health, credit transmission, and market confidence.
S&P 500 Earnings Yield measures expected earnings relative to price and is useful for assessing valuation and comparing equities with bond yields.
Equity Risk Premium measures the excess return investors expect from equities over risk-free assets and is a core framework for evaluating relative equity valuation.
VIX Index measures implied volatility in S&P 500 options and is widely used as a shorthand for equity market fear and risk aversion.
Nonfarm Payrolls — The headline US jobs report that routinely moves rates, FX, and equity index volatility.
Risk Reversal — Call-put spread package measuring directional skew in FX and equity options.
Quality Factor — Exposure to profitable, stable balance-sheet companies versus junk quality.
Value Factor — Cheap versus expensive stocks — cyclical performance tied to rates and inflation.
Statistical Arbitrage — Short-horizon RV on co-moving securities using factor neutralization.
Bank Capital Ratio — Loss-absorbing equity buffer determining lending capacity and dividend policy.
Earnings Revisions Breadth — Net upgrades versus downgrades predicting index momentum.
Guidance Surprise — Management outlook versus consensus — moves single names and sectors.
Shareholder Yield — Combined dividends and buybacks as cash return to equity holders.
Buyback Yield (Equity).
Sector Rotation Signals — Cyclical versus defensive leadership indicating growth and rates regime.
IPO Pipeline — New issuance calendar as sentiment and liquidity absorption gauge.
Private Equity Dry Powder — Undeployed PE capital that can support LBO activity and credit demand.
LEAPS Options — Long-dated equity options used for leveraged directional or hedge overlays.
Short Squeeze (Equity).
Gamma Squeeze Equity (Equity).
Days to Cover (Equity).
Borrow Fee Stock (Equity).
Free Float (Equity).
Index Rebalance Flow (Equity).
Passive Ownership Share (Equity).
Options Expiration Pinning (Equity).
Window Dressing (Equity).
Tax Loss Harvesting (Equity).
Buyback Blackout (Equity).
Guidance Cut Cycle (Equity).
Margin Debt (Equity).
AAII Sentiment (Equity).
Put Call Skew Equity (Equity).
Auction Imbalance (Equity).
MOC Imbalance (Equity).
MOO Auction (Equity).
AAII Sentiment (Equity).
ADR Parity banks (Equity).
ADR Parity China (Equity).
ADR Parity EM (Equity).
ADR Parity energy (Equity).
ADR Parity Europe (Equity).
ADR Parity growth (Equity).
ADR Parity healthcare (Equity).
ADR Parity Japan (Equity).
ADR Parity large-cap (Equity).
ADR Parity mega-cap (Equity).
ADR Parity small-cap (Equity).
ADR Parity tech (Equity).
ADR Parity US (Equity).
ADR Parity value (Equity).
ADR Premium Discount (Equity).
Analyst Upgrade Cycle banks (Equity).
Analyst Upgrade Cycle China (Equity).
Analyst Upgrade Cycle EM (Equity).
Analyst Upgrade Cycle energy (Equity).
Analyst Upgrade Cycle Europe (Equity).
Analyst Upgrade Cycle growth (Equity).
Analyst Upgrade Cycle healthcare (Equity).
Analyst Upgrade Cycle Japan (Equity).