• ODERIM (Outlier Detection for Risk Management)

    E. Jay, QUANTVALLEY.

    Abstract

    ODERIM “Outlier Detection/Estimation and mitigation for RIsk Management and control, based on Advanced SSP methods, with a focus on extreme situations”.

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  • Trading-Related Skill Across Investment Funds

    D. W. R. Rosenthal, Department of Finance, University of Illinois at Chicago, USA.

    Abstract

    Many institutional traders split large orders into smaller orders sent over some time period. This schedule may be optimized to reduce price impact. I have developed performance metrics to assess how effective funds are at (i) executing these smaller orders, (ii) deciding when to wait for orders to be filled (i.e. market timing), and (iii) scheduling the smaller orders. The performance metrics have sound theoretical backing and let us separate trading-related performance from noise. I propose to use data on orders and trades for a selection of investment funds to characterize these skills. For the initial work, I will study: (i) the relative magnitudes of these skills, (ii) how these skills vary across funds, (iii) what fraction of firms seem to possess superior trading-related skills, (iv) how firms’ skills change over time due to learning, and (v) the savings in transactions costs which accrue to investors. For possible further work, I suspect this data would help answer further questions including: (vi) how firms’ trading-related performance changes with macroeconomic factors, (vii) whether changes in trading-related skills result in fund inflows, (viii) the value of these inflows to the funds.

  • Contagious Defaults: Evidence from Subprime Mortgages

    Professor D. Keenan, Professor A. Heinen, and M.-L. Kim, Université de Cergy Pontoise, France.

    Abstract

    The object of this project is to study default dependence and contagion amongst nonagency securitized mortgages in the US over the period 1998-2011. We will use a Cox proportional hazard model in a competing risk framework for default (and prepayment) and a copula model for the dependence amongst individual hazards. Dependence between defaults can occur because of geographical proximity, common economic conditions, which may be of either a local or economy-wide nature, the business cycle, interest rates, etc. We want to quantify the amount of this default dependence and investigate the reasons why such dependence occurs.

    Working paper

    Contagion in Subprime Mortgage Defaults : a Composite Likelihood Approach

  • Machine Learning, Sentiment indices and Stock Market Prices

    Professor M. McAleer, Professor D.E. Allen and Dr. A.K. Singh, Econometric Institute, Erasmus School of Economics, Erasmus University Rotterdam, The Netherlands.

    Abstract

    The focus of this study is to develop theories that can underpin information mining on the web to produce reliable information and to assess the impact of existing methods on the behaviour of market prices using techniques that are based upon the concept of entropy.

    The framework for the analysis will be provided by information theory. The major metrics will be constructed on the application of concepts related to Shannon entropy and cross entropy. The data for the study will be drawn from Thomson Reuters market data provided by The Securities Industry Research Centre of the Asia Pacific (SIRCA).

    Working papers:

    • An entropy based analysis of the relationship between the DOW JONES Index and the TRNA Sentiment series,
    • Daily Market News Sentiment and Stock Prices.
  • Predatory Trading in Equity Markets

    V. van Kervel, VU University of Amsterdam and Professor A. Menkveld, VU University of Amsterdam

    Working paper: High-Frequency Trading around Large Institutional Orders, forthcoming in the Journal of Finance, see Publications.

  • The Booms and Busts of Beta Arbitrage : Measuring the extent of the Low-Beta Crowd

    D. Lou, Financial Markets Group, London School of Economics and Professor C. Polk, Financial Markets Group, London School of Economics

    Working paper: The Booms and Busts of Beta Arbitrage

  • Momentum Strategies in Futures Markets and Trend-following Funds

    Professor R. Kosowski, Center for Hedge Fund Research & Risk Management Laboratory at Imperial College Business School and A.-K. Baltas, Visiting Researcher, Imperial College, Quantitative Analyst at UBS Investment Bank

    Working Paper: Momentum Strategies in Futures Markets and Trend-following Funds

  • Identifying Contagion

    Professor M.Dungey, School of Economics and Finance, University of Tasmania, Australia and Professor E. Renault, Brown University, USA

    Working paper: Identifying Contation. Paper published in Journal of Applied Econometrics, see Publications.