In this paper we provide compelling evidence of cyclical mean reversion and multiperiod stock return predictability over horizons of about 30 years with a half-life of about 15 years. This implies that the US stock market follows a long-term rhythm where a period of above average returns tends to be followed by a perio…
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48 results for “long-term returns”
Characterizing asymmetric and bimodal long-term financial return distributions through quantum walksq-fin.ST
Quantum walk model captures asymmetry and bimodality in long-term financial returns.
problem Inadequate classical models for long-term financial return distributions.
method Discrete-time quantum walk model.
result Captures bimodal and asymmetric probability distributions.
We investigate the two components of the total daily return (close-to-close), the overnight return (close-to-open) and the daytime return (open-to-close), as well as the corresponding volatilities of the 2215 NYSE stocks from 1988 to 2007. The tail distribution of the volatility, the long-term memory in the sequence, a…
We study the long-term memory in diverse stock market indices and foreign exchange rates using the Detrended Fluctuation Analysis(DFA). For all daily and high-frequency market data studied, no significant long-term memory property is detected in the return series, while a strong long-term memory property is found in th…
Dynamic Network Riskq-fin.GN
The paper finds stocks with higher dynamic network risk have lower returns.
problem Understanding and pricing short-term and long-term dynamic network risk in stock returns.
method Examined the relationship between stock sensitivities to dynamic network risk and expected returns, using economic theory and empirical analysis.
result A one-standard deviation increase in long-term network risk loadings associates with a 7.66% drop in annualized expected returns.
Re-evaluating Short- and Long-Term Trend Factors in CTA Replication: A Bayesian Graphical Approachcs.AI
This paper uses Bayesian models to analyze CTA returns across short and long-term trends.
problem The relative merits and interactions of short- and long-term trend systems in CTA replication remain controversial.
method Dynamic decomposition of CTA returns into short-term trend, long-term trend, and market beta factors using a Bayesian graphical model.
result The blend of horizons shapes the strategy's risk-adjusted performance.
Online reviews are feedback voluntarily posted by consumers about their consumption experiences. This feedback indicates customer attitudes such as affection, awareness and faith towards a brand or a firm and demonstrates inherent connections with a company's future sales, cash flow and stock pricing. However, the pred…
Bounds on long-term returns of leveraged ETFs are given.
problem Uncertainty in long-term returns of leveraged ETFs.
method Quadratic bounds on log-returns based on daily log-returns of the underlying index.
result Sufficient conditions for outperformance and underperformance of leveraged ETFs.
Researchers have used many different methods to detect the possibility of long-term dependence (long memory) in stock market returns, but evidence is in general mixed. In this paper, three different tests, (namely Rescaled Range (R/S), its modified form, and the semi-parametric method (GPH)), in addition to a new appro…
Behavioral theories posit that investor sentiment exhibits predictive power for stock returns, whereas there is little study have investigated the relationship between the time horizon of the predictive effect of investor sentiment and the firm characteristics. To this end, by using a Granger causality analysis in the …
The paper models financial markets and real economy interactions using a large agent framework.
problem Understanding capital allocation and accumulation in financial markets and real economy interactions.
method Developed a field-formalism model to analyze interactions between financial markets and real economy with a large number of heterogeneous agents.
result The number of firms in each sector depends on the aggregate financial capital invested and expected long-term returns.
The study analyzes macroeconomic factors affecting copper futures volatility and long-term correlation with S&P 500.
problem Understanding the impact of macroeconomic variables on copper futures volatility and long-term correlation.
method Employed GARCH-MIDAS and DCC-MIDAS modeling frameworks to examine the influence of low-frequency macroeconomic variables on copper futures returns and long-term correlation with S&P 500.
result PPI is the most efficient macroeconomic variable impacting copper futures returns, and MIDAS filter improves model fitness and long-run relationship.
Study uses VIX for zero-coupon Treasury rates, proving long-term stability and returns.
problem Modeling zero-coupon Treasury rates with VIX for volatility.
method Multivariate autoregressive stochastic volatility model, proving stability and Law of Large Numbers.
result VIX accurately models zero-coupon Treasury rates and returns.
Volatility of S&P 500 daily returns increases over 60 years.
problem Why does S&P 500 daily volatility increase over time?
method Hypothetical market forces increasing volatility.
result Long-term volatility of S&P 500 daily returns will continue to increase until a threshold.
Social media hype can misprice IPO stocks, leading to short-term gains but long-term losses.
problem Mispricing of IPO stocks due to social media hype.
method Analysis of investor emotions on StockTwits and Twitter.
result High pre-IPO enthusiasm leads to higher short-term returns but lower long-term returns.
The Kelly rule fails to maximize growth in a time-changed return setting.
problem Performance of the Kelly rule in a time-changed return process.
method Investigated the Kelly rule in a semi-martingale setting with a time change process.
result The Kelly rule does not maximize average growth rate in a non-normal log-return setting.
Statistical fields model explains capital allocation and accumulation among firms and investors.
problem Understanding capital allocation and accumulation dynamics among firms and investors.
method Applied statistical fields formalism to heterogeneous agents divided into firms and investors.
result Capital accumulation depends on various factors including long-term returns, competition, and stock price volatility.
The Limits of Leverageq-fin.PM
When trading incurs proportional costs, leverage can scale an asset's return only up to a maximum multiple, which is sensitive to its volatility and liquidity. In a model with one safe and one risky asset, with constant investment opportunities and proportional costs, we find strategies that maximize long term returns …
This paper reexamines the profitability of loser, winner and contrarian portfolios in the Chinese stock market using monthly data of all stocks traded on the Shanghai Stock Exchange and Shenzhen Stock Exchange covering the period from January 1997 to December 2012. We find evidence of short-term and long-term contraria…
The Long Bond, Long Forward Measure and Long-Term Factorization in Heath-Jarrow-Morton Modelsq-fin.MF
This paper proves existence of the long bond, long forward measure and long-term factorization of the stochastic discount factor (SDF) of Alvarez and Jermann (2005) and Hansen and Scheinkman (2009) in Heath-Jarrow-Morton (HJM) models in the function space framework of Filipovic (2001). A sufficient condition on the wei…
Leveraged ETF Investingq-fin.ST
Leveraged ETFs can boost returns but increase risk.
problem Risk and return trade-off in leveraged ETF investing.
method Bootstrapped Monte-Carlo simulations of mixed stock and bond portfolios.
result Leverage can amplify returns without significantly increasing risk for long-term investors.
It will be discussed the statistics of the extreme values in time series characterized by finite-term correlations with non-exponential decay. Precisely, it will be considered the results of numerical analyses concerning the return intervals of extreme values of the fluctuations of resistance and defect-fraction displa…
The original Kelly criterion provides a strategy to maximize the long-term growth of winnings in a sequence of simple Bernoulli bets with an edge, that is, when the expected return on each bet is positive. The objective of this work is to consider more general models of returns and the continuous time, or high frequenc…
Study analyzes Nifty 50 returns over 34 years, showing P/E ratio predicts long-term gains.
problem Understanding equity return dynamics in the Indian market over various horizons.
method Unified, distribution-aware, complexity-informed framework using 34 years of Nifty 50 data.
result P/E ratio probabilistically maps return distributions across different investment horizons.
We present a detailed study of the performance of a trading rule that uses moving average of past returns to predict future returns on stock indexes. Our main goal is to link performance and the stochastic process of the traded asset. Our study reports short, medium and long term effects by looking at the Sharpe ratio …
This paper constructs and studies the long-term factorization of affine pricing kernels into discounting at the rate of return on the long bond and the martingale component that accomplishes the change of probability measure to the long forward measure. The principal eigenfunction of the affine pricing kernel germane t…
This paper discusses the sensitivity of the long-term expected utility of optimal portfolios for an investor with constant relative risk aversion. Under an incomplete market given by a factor model, we consider the utility maximization problem with long-time horizon. The main purpose is to find the long-term sensitivit…
The paper presents an evolutionary economic model for the price evolution of stocks. Treating a stock market as a self-organized system governed by a fast purchase process and slow variations of demand and supply the model suggests that the short term price distribution has the form a logistic (Laplace) distribution. T…
Study examines how risk tolerance impacts long-term investment returns.
problem Understanding the impact of risk tolerance on investment returns over time.
method Used Malliavin calculus and Hansen--Scheinkman decomposition.
result Risk aversion affects long-term investment utility through eigenvalues and eigenfunctions.
In a large E-commerce platform, all the participants compete for impressions under the allocation mechanism of the platform. Existing methods mainly focus on the short-term return based on the current observations instead of the long-term return. In this paper, we formally establish the lifecycle model for products, by…
SAMBA predicts stock returns efficiently using Mamba and graph neural networks.
problem Accurate stock price predictions for financial returns.
method SAMBA integrates Mamba architecture with graph neural networks to achieve near-linear computational complexity.
result SAMBA significantly outperforms state-of-the-art models in prediction accuracy.
The paper links labor income risk to stock returns using industry portfolio returns.
problem Understanding the impact of sectoral shifts on stock returns.
method Using cross-industry dispersion (CID) as a proxy for unemployment risk, the paper examines the relationship between stock returns and the sensitivity of returns to CID innovations.
result Stocks with high sensitivity to CID have lower expected returns, suggesting they are more exposed to sectoral shifts and unemployment risk.
We propose a novel approach to sentiment data filtering for a portfolio of assets. In our framework, a dynamic factor model drives the evolution of the observed sentiment and allows to identify two distinct components: a long-term component, modeled as a random walk, and a short-term component driven by a stationary VA…
The growth-optimal portfolio optimization strategy pioneered by Kelly is based on constant portfolio rebalancing which makes it sensitive to transaction fees. We examine the effect of fees on an example of a risky asset with a binary return distribution and show that the fees may give rise to an optimal period of portf…
The study improves Monte Carlo simulations for long-term investments using advanced financial models.
problem Improving the accuracy of long-term investment simulations.
method Developed a multivariate process incorporating recent financial models and probabilistic forecasts.
result Increased accuracy in predicting portfolio values over decades.
Efficiency in foreign exchange marketscond-mat.dis-nn
A quantitative check of weak efficiency in US dollar/German mark exchange rates is developed using high frequency data. We show the existence of long term return anomalies. We introduce a technique to measure the available information and show it can be profitable following a particular trading rule.
Leveraged ETFs can outperform their targets in certain market conditions, contrary to the volatility drag hypothesis.
problem The long-term performance decay of leveraged ETFs due to volatility drag.
method Unified framework incorporating AR(1) and AR-GARCH models, continuous-time regime switching, and flexible rebalancing frequencies.
result Return dynamics, including return autocorrelation, volatility clustering, and regime persistence, determine LETF performance.
We propose a comprehensive treatment of the leverage effect, i.e. the relationship between returns and volatility of a specific asset, focusing on energy commodities futures, namely Brent and WTI crude oils, natural gas and heating oil. After estimating the volatility process without assuming any specific form of its b…
The distribution of recurrence times or return intervals between extreme events is important to characterize and understand the behavior of physical systems and phenomena in many disciplines. It is well known that many physical processes in nature and society display long range correlations. Hence, in the last few year…
New PU ratio predicts long-term Bitcoin returns better than other methods.
problem Lack of convincing proxies for cryptocurrency fundamentals.
method Developed a new market-to-fundamental ratio (PU ratio) using blockchain accounting methods.
result PU ratio effectively predicts long-term Bitcoin returns compared to alternative methods.
This paper analyzes the robust growth rate of leveraged ETFs under uncertain parameters.
problem Analyzing the robust long-term growth rate of leveraged ETFs with uncertain parameters.
method Derive worst-case parameters using comparison principle and martingale extraction method.
result Explicitly obtain robust long-term growth rates under various models.
Study examines cryptocurrency behavior during and after the pandemic.
problem Impact of the pandemic on cryptocurrency long-term memory and volatility.
method Used wavelet-based Hurst exponent analysis on eleven important coins.
result Long-term memory of returns mildly affected during pandemic, but volatility suffered temporary impact.
The statistical properties of the return intervals between successive 1-min volatilities of 30 liquid Chinese stocks exceeding a certain threshold are carefully studied. The Kolmogorov-Smirnov (KS) test shows that 12 stocks exhibit scaling behaviors in the distributions of for different thresholds . …
QR-MIX models joint state-action values as a distribution to handle randomness in MARL.
problem Randomness in rewards and observations leads to randomness in long-term returns in MARL.
method QR-MIX uses quantile regression and combines it with QMIX and IQN to model joint state-action values as a distribution.
result QR-MIX outperforms QMIX in the StarCraft Multi-Agent Challenge (SMAC) environment.
The study examines volatility models and finds decoupling of short- and long-term correlation structures.
problem Understanding the dynamic of volatility at different time scales.
method Developed a composite likelihood estimation framework for parametric continuous-time stationary Gaussian processes.
result The short- and long-term correlation structures of stochastic volatility are decoupled.
Long-term and blow-up behaviors of exponential moments in multi-dimensional affine diffusionsq-fin.PR
This paper considers multi-dimensional affine processes with continuous sample paths. By analyzing the Riccati system, which is associated with affine processes via the transform formula, we fully characterize the regions of exponents in which exponential moments of a given process do not explode at any time or explode…
Investors benefit from long horizons in a market with mean-reverting equity returns.
problem Optimal portfolio choice in a market with mean-reverting risk-free rate and equity risk-premium.
method Mean-variance optimization, Euler-Lagrange equation, Calculus of Variations, spectral problem.
result Optimal policies are characterized by eigenvalues of the lambda-matrix, leading to better risk-return trade-offs for long-term investors.
A class of heterogeneous agent models is investigated where investors switch trading position whenever their motivation to do so exceeds some critical threshold. These motivations can be psychological in nature or reflect behaviour suggested by the efficient market hypothesis (EMH). By introducing different propensitie…