Download or read book Mean Reversion of Volatility Around Extreme Stock Returns written by Ling T. He and published by . This book was released on 2013 with total page 12 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper examines mean reversion processes in volatility structure of stock markets after extremely high or low stock returns. The stock market volatility is reflected in three aspects, overall volatility, volatility momentum, and volatility concentration, and they are measured by three basic statistical measures, variance/standard deviation, skewness, and kurtosis, respectively. The results of this study illustrate remarkable reversions in volatility momentum, concentration, and level between periods of pre and post-extremely high stock returns. Evidence of this study also supports some strong volatility reversions after extremely negative stock returns. The findings are helpful to investing professionals and financial policy makers to expand their understanding of different aspects of volatility structure and their change cycles. The knowledge may enhance effectiveness of portfolio managers in risk management after busts of stock price bubbles.
Download or read book Testing Mean Reversion in Stock Market Volatility written by Turan G. Bali and published by . This book was released on 2012 with total page 36 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper presents a comprehensive study of continuous time GARCH modeling with the thin-tailed normal and the fat-tailed Student-t and generalized error distributions. The paper measures the degree of mean reversion in stock return volatility based on the relationship between discrete time GARCH and continuous time diffusion models. The convergence results based on the aforementioned distribution functions are shown to have similar implications for testing mean reversion in stochastic volatility. Alternative models are compared in terms of their ability to capture mean-reverting behavior of stock return volatility. The empirical evidence obtained from several stock market indices indicates that the conditional variance, log-variance, and standard deviation of stock market returns are pulled back to some long-run average level over time.
Download or read book Volatility Clustering and Mean Reversion of Stock Returns in an Asset Pricing Model with Incomplete Learning written by Allan Timmermann and published by . This book was released on 1995 with total page 32 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book Mean Reversion in Stock Market Volatility written by Michael Dueker and published by . This book was released on 1994 with total page 19 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book Volatility Measures as Predictors of Extreme Returns written by Lorne N. Switzer and published by . This book was released on 2017 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper examines the relationship between volatility and the probability of occurrence of expected extreme returns in the Canadian market. Four measures of volatility are examined: implied volatility from firm option prices, conditional volatility calculated using an EGARCH model, idiosyncratic, and expected shortfall. A significantly positive relationship is observed between a firm's idiosyncratic volatility and the probability of occurrence of an extreme return in the subsequent month for firms. A 10% increase in idiosyncratic volatility in a given month is associated with the probability of an extreme shock in the subsequent month (top or bottom 1.5% of the returns distribution) of 26.4%. Other firm characteristics, including firm age, price, volume and book-to-market ratio, are also shown to be significantly related to subsequent firm extreme returns. The effects of conditional and implied volatility are mixed. The E-GARCH and expected shortfall measures of conditional volatility are consistent with mean reversion: high short term realizations of conditional volatility foreshadow a lower probability of extreme returns.
Download or read book Mean Reversion in Stock Prices written by Myung-Jig Kim and published by . This book was released on 1988 with total page 56 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book 3d Extreme Value Analysis for Stock Return Interest Rate and Speed of Mean Reversion written by Burhaneddin İzgi and published by . This book was released on 2018 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: It is important to analyze extreme cases of stock return, interest rate and speed of mean reversion together. While we explore strengths and limitations of Heston stochastic volatility model based on behavior of its numerical solutions using Milstein method simulations, we suggest model improvements in the light of real data applications. First, we perform high peak and fat-tail analysis for the impact of Heston model parameters on the simulations of the extreme situations by using the first four standardized moments and extreme value tools such as quantile-quantile (QQ), mean excess (ME) and Hill plots to examine the fat-tailness of the distributions. Later, we illustrate high peak and fat-tail analysis for BIST-100 index between 02 . 01 . 2004 and 17 . 06 . 2013. Moreover, we investigate 3D dynamics of the average logarithmic stock return, interest rate and speed of mean reversion variables, together. Furthermore, we believe that polarization and the transitions between polarizations and comovements are important part of extreme situation picture. We investigate comovement and polarization of interest rates and daily returns of BIST- 100 index between 2010 and 2013 in order to understand the corresponding behavioral dynamics. Heston stochastic volatility model predicts that the average logarithmic stock return increases as interest rate rises. Actually, we observe that there are also sufficiently large time intervals where interest rates were decreased and stock prices increased gradually in US stock markets and Borsa Istanbul, unlike the Heston stochastic volatility model suggests.
Download or read book Optimal Mean Reversion Trading written by Tim Leung (Professor of industrial engineering) and published by World Scientific. This book was released on 2015-11-26 with total page 221 pages. Available in PDF, EPUB and Kindle. Book excerpt: "Optimal Mean Reversion Trading: Mathematical Analysis and Practical Applications provides a systematic study to the practical problem of optimal trading in the presence of mean-reverting price dynamics. It is self-contained and organized in its presentation, and provides rigorous mathematical analysis as well as computational methods for trading ETFs, options, futures on commodities or volatility indices, and credit risk derivatives. This book offers a unique financial engineering approach that combines novel analytical methodologies and applications to a wide array of real-world examples. It extracts the mathematical problems from various trading approaches and scenarios, but also addresses the practical aspects of trading problems, such as model estimation, risk premium, risk constraints, and transaction costs. The explanations in the book are detailed enough to capture the interest of the curious student or researcher, and complete enough to give the necessary background material for further exploration into the subject and related literature. This book will be a useful tool for anyone interested in financial engineering, particularly algorithmic trading and commodity trading, and would like to understand the mathematically optimal strategies in different market environments."--
Download or read book Competition for Listings written by Thierry Foucault and published by . This book was released on 1999 with total page 64 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book Cointegration Causality and Forecasting written by Halbert White and published by Oxford University Press, USA. This book was released on 1999 with total page 512 pages. Available in PDF, EPUB and Kindle. Book excerpt: A collection of essays in honour of Clive Granger. The chapters are by some of the world's leading econometricians, all of whom have collaborated with and/or studied with both) Clive Granger. Central themes of Granger's work are reflected in the book with attention to tests for unit roots and cointegration, tests of misspecification, forecasting models and forecast evaluation, non-linear and non-parametric econometric techniques, and overall, a careful blend of practical empirical work and strong theory. The book shows the scope of Granger's research and the range of the profession that has been influenced by his work.
Download or read book Mean Reversion Across MENA Stock Markets written by Sam Hakim and published by . This book was released on 2003 with total page 12 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper investigates the mean reversion patterns in MENA stock markets. Following Fama and French (1988) and Lo and Mackinlay (1988) and using recent stock market data between 1995 and 2000 on Egypt, Jordan, Morocco, and Turkey we find evidence of mean reversion in Turkey with mixed results for the remaining MENA stock markets. The paper then introduces a non-parametric model to estimate the reverting mean and speed of reversion. The highest reverting mean is noted for Turkey, followed by Egypt, then Morocco, with Jordan ranking last. Monte Carlo simulations show consistent increases in the volatility of MENA stock returns as the speed of reversion slows. Our results have an important bearing on the pricing of equity derivatives in MENA and are useful for investors employing tactical asset allocation strategies.
Download or read book High Idiosyncratic Volatility and Low Returns written by Andrew Ang and published by . This book was released on 2008 with total page 50 pages. Available in PDF, EPUB and Kindle. Book excerpt: Stocks with recent past high idiosyncratic volatility have low future average returns around the world. Across 23 developed markets, the difference in average returns between the extreme quintile portfolios sorted on idiosyncratic volatility is -1.31% per month, after controlling for world market, size, and value factors. The effect is individually significant in each G7 country. In the U.S., we rule out explanations based on trading frictions, information dissemination, and higher moments. There is strong comovement in the low returns to high idiosyncratic volatility stocks across countries, suggesting that broad, not easily diversifiable, factors may lie behind this phenomenon.
Download or read book Interpreting Mean Reversion in Stock Returns written by Partha Gangopadhyay and published by . This book was released on 1998 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: This research attempts to distinguish between two competing economic explanations of mean reversion in stock returns: 1) mispricing in irrational markets versus 2) predictable time variation in security risk premia. Excess portfolio returns are decomposed into 'explained' and 'unexplained' components using the CAPM. If one restricts the market risk premium to be constant over time, then mean reversion could be interpreted as a manifestation of mispricing in irrational markets. But changing the assumption about the time-series behavior of the market risk premium dramatically alters the test results. If one permits the conditional market risk premium to vary and to differ from the unconditional market risk premium, then mean reversion in stock returns is consistent with rational pricing in the framework of the CAPM. This suggests one need not abandon models based on rationality to explain this puzzling return behavior.
Download or read book An equilibrium theory of excess volatility and mean reversion in stock market prices written by Alan J. Marcus and published by . This book was released on 1989 with total page 13 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book Analyzing Stock Market Volatility Using Extreme Day Measures written by Charles P. Jones and published by . This book was released on 2004 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: We develop a simple measure of volatility based on extreme-day returns and apply it to market returns during 1885 - 2002. Because returns are not normally distributed, the extreme-day measure, which is distribution free, might provide a better measure of stock market risk than the traditional standard deviation. The extreme-day measure more accurately explains investor behavior relative to standard deviation as shown by equity fund flows, and we find evidence that large negative changes appear to influence investor behavior more than large positive changes.
Download or read book Mean Reversion in Stock Prices written by James M. Poterba and published by . This book was released on 1987 with total page 42 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book Mean Reversion in Stock Returns written by Lawrence Summers and published by . This book was released on 1993 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:
