arXiv research

Deep learning predicts investor interest in stocks.

Retail investors set interest rates for P2P loans based on borrower characteristics.

The study examines how investor protection and past information affect stock returns and interest rates.

In this paper, we consider the problem of optimization of a portfolio consisting of securities. An investor with an initial capital, is interested in constructing a portfolio of securities. If the prices of securities change, the investor shall decide on reallocation of the portfolio. At each moment of time, the prices…

Covid lockdown increased interest in Italian stock market, leading to new investors.

Investors choose between bonds and savings accounts based on utility maximization.

We construct continuous-time equilibrium models based on a finite number of exponential utility investors. The investors' income rates as well as the stock's dividend rate are governed by discontinuous Levy processes. Our main result provides the equilibrium (i.e., bond and stock price dynamics) in closed-form. As an a…

Researchers solve a market model with stochastic interest rate using worst case approach.

Investment strategy optimized for ambiguity and interest rate risk.

Young investors, especially students, dominate Indonesian stock exchanges.

Study on optimal fees in hedge funds with first-loss compensation.

The optimal strategies for a long-term static investor are studied. Given a portfolio of a stock and a bond, we derive the optimal allocation of the capitols to maximize the expected long-term growth rate of a utility function of the wealth. When the bond has constant interest rate, three models for the underlying stoc…

In an incomplete continuous-time securities market with uncertainty generated by Brownian motions, we derive closed-form solutions for the equilibrium interest rate and market price of risk processes. The economy has a finite number of heterogeneous exponential utility investors, who receive partially unspanned income …

Recent works have shown that social media platforms are able to influence the trends of stock price movements. However, existing works have majorly focused on the U.S. stock market and lacked attention to certain emerging countries such as China, where retail investors dominate the market. In this regard, as retail inv…

In this paper, optimal consumption and investment decisions are studied for an investor who can invest in a fixed interest rate bank account and a stock whose price is a log normal diffusion. We present the method of the HJB equation in order to explicitly solve problems of this type with modifications such as a fixed …

Study investor attention using search volume data before and after mobile device popularity.

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 mark…

Study finds social media investor emotions predict stock prices.

Optimal buying and selling times for homes in fluctuating interest rates.

Model resolves asset pricing puzzles with price-impact.

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 …

The purpose of this paper is introducing rigorous methods and formulas for bilateral counterparty risk credit valuation adjustments (CVA's) on interest-rate portfolios. In doing so, we summarize the general arbitrage-free valuation framework for counterparty risk adjustments in presence of bilateral default risk, as de…

Behavioral Finance has become a challenge to the scientific community. Based on the assumption that behavioral aspects of investors may explain some features of the Stock Market, we propose an agent based model to study quantitatively this relationship. In order to approximate the simulated market to the complexity of …

We investigate the impact of capital gains taxes on optimal investment decisions in a quite simple model. Namely, we consider a risk neutral investor who owns one risky stock from which she assumes that it has a lower expected return than the riskless bank account and determine the optimal stopping time at which she se…

Most decision theories, including expected utility theory, rank dependent utility theory and cumulative prospect theory, assume that investors are only interested in the distribution of returns and not in the states of the economy in which income is received. Optimal payoffs have their lowest outcomes when the economy …

We introduce an equilibrium asset pricing model, which we build on the relationship between a novel risk measure, the Expected Downside Risk (EDR) and the expected return. On the one hand, our proposed risk measure uses a nonparametric approach that allows us to get rid of any assumption on the distribution of returns.…

Kelly criterion, that maximizes the expectation value of the logarithm of wealth for bookmaker bets, gives an advantage over different class of strategies. We use projective symmetries for a explanation of this fact. Kelly's approach allows for an interesting financial interpretation of the Boltzmann/Shannon entropy. A…

StockEmotions dataset for financial sentiment and emotion analysis.

Investigates Bitcoin market risk, showing volatility and jumps impact future volatility.

Interpretable AI model boosts investment confidence and profitability.

Wealth inequality is an important matter for economic theory and policy. Ongoing debates have been discussing recent rise in wealth inequality in connection with recent development of active financial markets around the world. Existing literature on wealth distribution connects the origins of wealth inequality with a v…

This paper evaluates random forest models for predicting stock price trends.

We present analytical investigations of a multiplicative stochastic process that models a simple investor dynamics in a random environment. The dynamics of the investor's budget, $x(t)$, depends on the stochasticity of the return on investment, $r(t)$, for which different model assumptions are discussed. The fat-tail d…

The conventional wisdom of mean-variance (MV) portfolio theory asserts that the nature of the relationship between risk and diversification is a decreasing asymptotic function, with the asymptote approximating the level of portfolio systematic risk or undiversifiable risk. This literature assumes that investors hold an…

Bitcoin reacts positively to USDT minting but not burning, showing state-dependence.

Investors can achieve optimal risk-reward trade-offs with bonds and stocks under mean-reverting stock returns.

This article presents valuation of Treasury Bonds (T-Bonds) on Macedonian Stock Exchange (MSE) and empirical test of duration, modified duration and convexity of the T-bonds at MSE in order to determine sensitivity of bonds prices on interest rate changes. The main goal of this study is to determine how standard valuat…

The study aims to explore the strength of causal relationship between stock price search interest and real stock market outcomes on worldwide equity market indices. Such a phenomenon could also be mediated by investor behavior and extent of news coverage. The stock-specific internet search trends data and corresponding…

In this paper we show how to hedge a zero coupon bond with a smaller amount of initial capital than required by the classical risk neutral paradigm, whose (trivial) hedging strategy does not suggest to invest in the risky assets. Long dated zero coupon bonds we derive, invest first primarily in risky securities and whe…

We consider the portfolio choice problem for a long-run investor in a general continuous semimartingale model. We suggest to use path-wise growth optimality as the decision criterion and encode preferences through restrictions on the class of admissible wealth processes. Specifically, the investor is only interested in…

Study uses ML to analyze how interest rates affect fund returns, finding gradient boosting is effective.

A robust machine learning approach forecasts U.S. Treasury yields, reducing risk for investors.

A repurchase agreement lets investors borrow cash to buy securities. Financier only lends to securities' market value after a haircut and charges interest. Repo pricing is characterized with its puzzling dual pricing measures: repo haircut and repo spread. This article develops a repo haircut model by designing haircut…

The paper uses stochastic control to analyze interest rate markets with roll-over risk.

Study on stock portfolio concentration among Finnish households and investors.

This paper investigates how realized and option implied volatilities are related to the future quantiles of commodity returns. Whereas realized volatility measures ex-post uncertainty, volatility implied by option prices reveals the market's expectation and is often used as an ex-ante measure of the investor sentiment.…

Cryptocurrencies have heavy-tailed return distributions, requiring diversification.

This article introduces the notion of arbitrage for a situation involving a collection of investments and a payoff matrix describing the return to an investor of each investment under each of a set of possible scenarios. We explain the Arbitrage Theorem, discuss its geometric meaning, and show its equivalence to Farkas…