Artículos con la etiqueta ‘Statistical Finance (q-fin.ST)’

Exchange Rate Predictability in a Changing World

Por • 6 mar, 2014 • Category: Economía

n expanding literature articulates the view that Taylor rules are helpful in predicting exchange rates. In a changing world however, Taylor rule parameters may be subject to structural instabilities, for example during the Global Financial Crisis. This paper forecasts exchange rates using such Taylor rules with Time Varying Parameters (TVP) estimated by Bayesian methods. In core out-of-sample results, we improve upon a random walk benchmark for at least half, and for as many as eight out of ten, of the currencies considered. This contrasts with a constant parameter Taylor rule model that yields a more limited improvement upon the benchmark.

Using Twitter to Model the EUR/USD Exchange Rate

Por • 27 feb, 2014 • Category: Economía

Fast, global, and sensitively reacting to political, economic and social events of any kind, these are attributes that social media like Twitter share with foreign exchange markets. The leading assumption of this paper is that information which can be distilled from public debates on Twitter has predictive content for exchange rate movements. This assumption prompted a Twitter-based exchange rate model that harnesses regARIMA analyses for short-term out-of-sample ex post forecasts of the daily closing prices of EUR/USD spot exchange rates. The analyses used Tweet counts collected from January 1, 2012 – September 27, 2013. To identify concepts mentioned on Twitter with a predictive potential the analysis followed a 2-step selection. Firstly, a heuristic qualitative analysis assembled a long list of 594 concepts, e.g., Merkel, Greece, Cyprus, crisis, chaos, growth, unemployment expected to covary with the ups and downs of the EUR/USD exchange rate. Secondly, cross-validation using window averaging with a fixed-sized rolling origin was deployed to select concepts and corresponding univariate time series that had error scores below chance level as defined by the random walk model.

Empirical symptoms of catastrophic bifurcation transitions on financial markets: A phenomenological approach

Por • 23 feb, 2014 • Category: Economía

The principal aim of this work is the evidence on empirical way that catastrophic bifurcation breakdowns or transitions, proceeded by flickering phenomenon, are present on notoriously significant and unpredictable financial markets. Overall, in this work we developed various metrics associated with catastrophic bifurcation transitions, in particular, the catastrophic slowing down (analogous to the critical slowing down). All these things were considered on a well-defined example of financial markets of small and middle to large capitalization. The catastrophic bifurcation transition seems to be connected with the question of whether the early-warning signals are present in financial markets. This question continues to fascinate both the research community and the general public.

Global Inequality in Energy Consumption from 1980 to 2010

Por • 31 dic, 2013 • Category: Economía

We study the global probability distribution of energy consumption per capita around the world using data from the U.S. Energy Information Administration (EIA) for 1980-2010. We find that the Lorenz curves have moved up during this time period, and the Gini coefficient G has decreased from 0.66 in 1980 to 0.55 in 2010, indicating a decrease in inequality. The global probability distribution of energy consumption per capita in 2010 is close to the exponential distribution with G=0.5. We attribute this result to the globalization of the world economy, which mixes the world and brings it closer to the state of maximal entropy. We argue that global energy production is a limited resource that is partitioned among the world population. The most probable partition is the one that maximizes entropy, thus resulting in the exponential distribution function. A consequence of the latter is the law of 1/3: the top 1/3 of the world population consumes 2/3 of produced energy. We also find similar results for the global probability distribution of CO2 emissions per capita.

Emergent quantum mechanics of finances

Por • 23 dic, 2013 • Category: Ambiente

This paper is an attempt at understanding the quantum-like dynamics of financial markets in terms of non-differentiable price-time continuum having fractal properties. The main steps of this development are the statistical scaling, the non-differentiability hypothesis, and the equations of motion entailed by this hypothesis. From perspective of the proposed theory the dynamics of S&P500 index are analyzed.

Copulas and time series with long-ranged dependences

Por • 27 nov, 2013 • Category: Crítica

We review ideas on temporal dependences and recurrences in discrete time series from several areas of natural and social sciences. We revisit existing studies and redefine the relevant observables in the language of copulas (joint laws of the ranks). We propose that copulas provide an appropriate mathematical framework to study non-linear time dependences and related concepts – like aftershocks, Omori law, recurrences, waiting times. We also critically argue using this global approach that previous phenomenological attempts involving only a long-ranged autocorrelation function lacked complexity in that they were essentially mono-scale.

A statistical physics perspective on criticality in financial markets

Por • 28 oct, 2013 • Category: Ambiente

Stock markets are complex systems exhibiting collective phenomena and particular features such as synchronization, fluctuations distributed as power-laws, non-random structures and similarity to neural networks. Such specific properties suggest that markets operate at a very special point. Financial markets are believed to be critical by analogy to physical systems but few statistically founded evidence have been given. Through a data-based methodology and comparison to simulations inspired by statistical physics of complex systems, we show that the Dow Jones and indices sets are not rigorously critical. However, financial systems are closer to the criticality in the crash neighborhood.

Uncovering the network structure of the world currency market: Cross-correlations in the fluctuations of daily exchange rates

Por • 5 may, 2013 • Category: Economía

The cross-correlations between the exchange rate fluctuations of 74 currencies over the period 1995-2012 are analyzed in this paper. The eigenvalue distribution of the cross-correlation matrix exhibits a bulk which approximately matches the bounds predicted from random matrices constructed using mutually uncorrelated time-series. However, a few large eigenvalues deviating from the bulk contain important information about the global market mode as well as important clusters of strongly interacting currencies. We reconstruct the network structure of the world currency market by using two different graph representation techniques, after filtering out the effects of global or market-wide signals on the one hand and random effects on the other. The two networks reveal complementary insights about the major motive forces of the global economy, including the identification of a group of potentially fast growing economies whose development trajectory may affect the global economy in the future as profoundly as the rise of India and China has affected it in the past decades.

The Food Crises: The US Drought

Por • 12 oct, 2012 • Category: Ambiente

Recent droughts in the midwestern United States threaten to cause global catastrophe driven by a speculator amplified food price bubble. Here we show the effect of speculators on food prices using a validated quantitative model that accurately describes historical food prices. During the last six years, high and fluctuating food prices have lead to widespread hunger and social unrest. While a relative dip in food prices occurred during the spring of 2012, a massive drought in the American Midwest in June and July threatens to trigger another crisis. In a previous paper, we constructed a model that quantitatively agreed with food prices and demonstrated that, while the behavior could not be explained by supply and demand economics, it could be parsimoniously and accurately described by a model which included both the conversion of corn into ethanol and speculator trend following.