ENDOGENOUS CROSS CORRELATIONS

2007 ◽  
Vol 11 (S1) ◽  
pp. 124-153 ◽  
Author(s):  
STEPHEN E. SATCHELL ◽  
STEFFI J.-H. YANG
Keyword(s):  
Financial Regulation ◽  
Equity Markets ◽  
Portfolio Diversification ◽  
Current View ◽  
Investment Behavior ◽  
Portfolio Risk ◽  
Herd Effect ◽  
Cross Correlations ◽  
Asymmetric Correlation ◽  
The Relationship

This paper studies the relationship between rational herding and cross correlations in security returns. It demonstrates analytically and numerically that herding, as a temporary, fragile convergence of investment behavior, can endogenously induce asset dependency. Furthermore, there exists a self-reinforcing process, in which market extreme events amplify the herd effect, which further exacerbates asset dependency. Considering the Taiwan and U.K. equity markets, we find that the simulated markets in the presence of herding have results closer to the real patterns of asset dependency than a static model with isolated, noninteracting individuals. Our findings cast doubts on the current view that transparent financial regulation is always desirable. Moreover, this paper finds statistical evidence of asymmetric correlation patterns in both the top 50 stocks in the U.K. and Taiwan equity markets. This suggests that portfolio diversification as a means of managing portfolio risk is unlikely to be effective in periods of extreme losses in these markets.

PRIOR TRADING OUTCOMES AND SUBSEQUENT PORTFOLIO RISKS: USING SECURITIES DEALER IN TAIWAN AS AN EXAMPLE

2020 ◽  
pp. 2050012
Author(s):  
YONG-CHIN LIU ◽  
HSIANG-JU CHEN ◽  
WEI-TING HSU
Keyword(s):  
Risk Taking ◽  
Market Condition ◽  
Investment Behavior ◽  
Rational Behavior ◽  
Portfolio Risk ◽  
Stock Portfolios ◽  
House Money Effect ◽  
Industry Competition ◽  
The Relationship ◽  
Subsequent Risk

This study examines whether the investment behavior of securities dealers is consistent with the predictions of the house money and break-even effects. Using the stock portfolios, dealers hold in Taiwan from 1996 to 2013 as a sample, we test the relationship between trading gains/losses and subsequent changes in portfolio risk. The results show that only gains with low risks, not all gaining situations, cause subsequent risk preferences, and regardless of the size of the trading loss, there is not a significant change in subsequent risk. Controlling dealers’ characteristics, industry competition, and the stock market condition, the evidence shows that the house money effect on dealer behavior exists after earning low-risk profits and does not support the break-even effect. These results are qualitatively unchanged after robustness checks that primarily exclude dealer overconfidence effect and ensure that the risk-taking behavior under low risks results in a decrease in gains and thus not a rational behavior.

ANALISIS PORTOFOLIO INVESTASI PADA SAHAM LQ45 DENGAN METODE MEAN VARIAN SATU KONSTRAIN

Jurnal Varian ◽  
2018 ◽  
Vol 1 (2) ◽  
pp. 22-29
Author(s):  
Gilang Primajati
Keyword(s):  
Capital Markets ◽  
Minimum Variance ◽  
Return Rate ◽  
Optimal Portfolio ◽  
Portfolio Diversification ◽  
Portfolio Risk ◽  
Expected Return ◽  
Positive Weight ◽  
The Mean

In the capital markets, especially the investment market, the establishment of a portfolio is something that must be understood by investors. Portfolio formation by investors to maximize profits as much as possible by minimizing the risk of losses that may occur. Portfolio diversification is defined as portfolio formation in such a way that it can reduce portfolio risk without sacrificing returns. Optimal portfolio with efficient-portfolio mean criteria, investors only invest in risk assets only. Investors do not include risk free assets in their portfolios. The efficient variance portfolio is defined as a portfolio that has minimum variance among the overall possible portfolio that can be formed, at the same expected return rate. The mean method of one constraint variant can be used as the basis for optimal portfolio determination. The shares of LQ-45 used are shares of AALI, BBCA, UNVR, TLKM and ADHI. AALI shares received a positive weight of 7%, BBCA 48%, UNVR 16%, TLKM 26% and ADHI 3%

scholarly journals Credit procyclicality and financial regulation in South Africa

2016 ◽  
Vol 19 (4) ◽  
pp. 467-478
Author(s):  
James Bernstein ◽  
Leroi Raputsoana ◽  
Eric Schaling
Keyword(s):  
South Africa ◽  
Business Cycle ◽  
Financial Institutions ◽  
Financial Regulation ◽  
Banking Supervision ◽  
Expansion Phase ◽  
Reference Guide ◽  
Common Reference ◽  
The Business Cycle ◽  
The Relationship

This study assesses the behaviour of credit extension over the business cycle in South Africa for the period 2000 to 2012. This is motivated by the proposal of the Basel Committee on Banking Supervision to look at credit extension over the business cycle as a reference guide for implementing countercyclical capital buffers for financial institutions. The study finds that credit extension in South increases during the trough phase, while the relationship between credit extension and the business cycle becomes insignificant during the peak phase. The study also finds that credit extension decreases during the expansion phase, while it increases during the contraction phase. Thus we do not find any evidence of procyclical behaviour of credit extension in South Africa, and the latter should therefore be used with caution and not as a mechanical rule based common reference guide for countercyclical capital buffers for financial institutions. 

scholarly journals Stimulus-Dependent Correlations in Threshold-Crossing Spiking Neurons

2009 ◽  
Vol 21 (8) ◽  
pp. 2269-2308 ◽  
Author(s):  
Yoram Burak ◽  
Sam Lewallen ◽  
Haim Sompolinsky
Keyword(s):  
Ganglion Cells ◽  
Retinal Ganglion ◽  
Qualitative Properties ◽  
Fire Model ◽  
Integrate And Fire ◽  
Threshold Crossing ◽  
Cross Correlations ◽  
Bursting Events ◽  
The One ◽  
The Relationship

We consider a threshold-crossing spiking process as a simple model for the activity within a population of neurons. Assuming that these neurons are driven by a common fluctuating input with gaussian statistics, we evaluate the cross-correlation of spike trains in pairs of model neurons with different thresholds. This correlation function tends to be asymmetric in time, indicating a preference for the neuron with the lower threshold to fire before the one with the higher threshold, even if their inputs are identical. The relationship between these results and spike statistics in other models of neural activity is explored. In particular, we compare our model with an integrate-and-fire model in which the membrane voltage resets following each spike. The qualitative properties of spike cross-correlations, emerging from the threshold-crossing model, are similar to those of bursting events in the integrate-and-fire model. This is particularly true for generalized integrate-and-fire models in which spikes tend to occur in bursts, as observed, for example, in retinal ganglion cells driven by a rapidly fluctuating visual stimulus. The threshold-crossing model thus provides a simple, analytically tractable description of event onsets in these neurons.

Using Neural Networks to Discover Patterns in International Equity Markets

2002 ◽  
pp. 205-219 ◽  
Author(s):  
Mary E. Malliaris ◽  
Linda Salchenberger
Keyword(s):  
Neural Networks ◽  
Equity Markets ◽  
Time Frame ◽  
Exact Nature ◽  
Statistical Tools ◽  
New Approach ◽  
International Equity Markets ◽  
International Equity ◽  
The Relationship

The use of neural networks represents a new approach to how this type of problem can be investigated. The economics and finance literature is full of studies that require the researcher to prespecify the exact nature of the relationship and select specific variables to test. In this study, we use a multistage approach that requires no prespecification of the model and allows us to look for associations and relationships that may not have been considered. Previous studies have been limited by the nature of statistical tools, which require the researcher to determine the variables, time frame, and markets to test. An intelligent guess may lead to the desired outcome, but neural networks are used to produce a more thorough analysis of the data, thus improving the researcher’s ability to uncover unanticipated relationships and associations.

Financial Regulation

2011 ◽  
Vol 216 ◽  
pp. F4-F9 ◽  
Author(s):  
Ray Barrell ◽  
E. Phillip Davies
Keyword(s):  
Risk Taking ◽  
Financial Crises ◽  
Financial Regulation ◽  
Banking Regulation ◽  
Committee Report ◽  
Costs And Benefits ◽  
Basel Committee ◽  
The Core ◽  
The World ◽  
The Relationship

The financial crisis that engulfed the world in 2007 and 2008 has led to a wave of re-regulation and discussion of further regulation that has culminated in the proposals from the Basel Committee as well as those in the Vickers Committee report on Banking Regulation and Financial Crises. This issue of the Review contains a number of papers on Banking Regulation, covering many aspects of the debate, and we can put that debate in perspective through these papers and also by discussing our work on the relationship between bank size and risk taking, which is reported in Barrell et al. (2011). We addressed the causes of the crisis in the October 2008 Review, and began to look at the costs and benefits of bank regulation in Barrell et al. (2009). In that paper we argued that we needed to know the causes of crises and whether the regulators could do anything to affect them before we discussed new regulations. It is now generally agreed that increasing core capital reduces the probability of a crisis occurring, and most changes in regulation that are being discussed see this as the core of their toolkit. The work by the Institute macro team in Barrell et al. (2009) and in Barrell, Davis, Karim and Liadze (2010) was the first to demonstrate that there was a statistically important role for capital in defending against the probability of a crisis occurring, and our findings were widely used in the policy community in the debate over reform.

Time-Series and Dynamic Cross-Correlations Analysis on Unexpected Information: Evidence from Media News and Online Postings

2019 ◽  
Vol 19 (02) ◽  
pp. 2050011
Author(s):  
Yan Li ◽  
Xiangyu Kong ◽  
Xiao Li ◽  
Zuochao Zhang
Keyword(s):  
Mass Media ◽  
New Media ◽  
Trading Volume ◽  
Cross Correlation ◽  
Short Term ◽  
Cross Correlations ◽  
The Cross ◽  
The One ◽  
The Relationship

In this paper, we investigate the relationship between unexpected information from postings and news, and the unexpected information is measured by the residual of regressions of trading volume on numbers of news or postings. We mainly find that (i) There are significant positive contemporaneous correlations between the unexpected information coming from postings and different kinds of news; the correlation between the unexpected information coming from postings and new media news is stronger than that between the unexpected information coming from postings and mass media news; (ii) The unexpected information coming from postings could cause the unexpected information coming from news, but only the unexpected information coming from the mass media news could cause that coming from postings; (iii) There are persistent power-law cross-correlations between the unexpected information coming from postings and that coming from mass media news and new media news. The cross-correlation between the unexpected information coming from postings and new media news is more persistent than the one between the unexpected information coming from postings and mass media news. The cross-correlations are all more stable in long term than in short term. We attribute our findings above to the dissemination speed of the information on the Internet.

Financial instability, integration and volatility of emerging South Asian stock markets

2017 ◽  
Vol 6 (2) ◽  
pp. 177-190 ◽  
Author(s):  
Rakesh Kumar ◽  
Raj S. Dhankar
Keyword(s):  
Stock Returns ◽  
South Asian ◽  
Stock Markets ◽  
Equity Markets ◽  
International Market ◽  
Portfolio Diversification ◽  
Financial Instability ◽  
Content Type ◽  
Long Run ◽  
Short Run

Purpose The purpose of this paper is to examine the short- and long-run spillover effect of international financial instability on emerging South Asian stock markets. The paper also investigates the financial integration regionally. Design/methodology/approach Granger causality test is used for short-run causal relations. Since results of preliminary test highlight the significant autocorrelations in stock returns, GARCH class models with extreme shocks in international financial market are utilized to test the long-run spillover impact on stock returns. Findings Results indicate significant short- and long-run spillover impacts of international financial instability on the stock returns. They highlight the significant co-integration of South Asian stock markets with the international market. Significant correlations in stock returns and volatility reveal the degree of regional integration to be high between India, Pakistan and Sri Lanka. Research limitations/implications Business, political and market conditions of South Asian stock markets are fundamentally different from each other. These economies were liberalized at different time, which in turn may affect the degree of integration with international equity markets and regionally alike. Practical implications Financial liberalization has linked the South Asian stock markets to the rest of the world. Stock prices move in the same line with the emergence of global expected and unexpected economic shocks. The benefits that arise from the diversification of funds will be eradicated in the long run. Investors with long investment horizons will not actually benefit from portfolio diversification in South Asian equity markets. The Bangladesh stock market does not respond to volatility in international market in the short run and may be a good destination for short-term investment. Originality/value Pioneer efforts are made by utilizing a novel approach with the use of net volatility change in world financial instability for measuring the short- and long-run impacts. Given the emergence of South Asian stock markets, new insights into their vulnerability to world financial shocks provide interesting findings for portfolio diversification.

CROSS-CORRELATED MEMORIES IN COMPLETELY-CONNECTED NETWORKS

1990 ◽  
Vol 04 (01) ◽  
pp. 113-121 ◽  
Author(s):  
W.A.T. WAN ABDULLAH
Keyword(s):  
Computer Simulations ◽  
Hopfield Model ◽  
Least Mean Squares ◽  
Feed Forward ◽  
Layered Networks ◽  
Cross Correlations ◽  
Simulation Results ◽  
Binary Network ◽  
Associative Recall ◽  
The Relationship

The Hopfield model for associative recall in a massively connected binary network is reviewed. The problems involved in representation are pointed out. Learning of cross-correlations is introduced, and results of computer simulations are displayed. The relationship with least mean squares learning in feed-forward layered networks is pointed out, leading to the analogue of unlearning. Simulation results show the performance of such a system.

scholarly journals Relationship Between Media Coverage and Measles-Mumps-Rubella (MMR) Vaccination Uptake in Denmark: Retrospective Study (Preprint)

2017 ◽  
Author(s):  
Niels Dalum Hansen ◽  
Kåre Mølbak ◽  
Ingemar Johansson Cox ◽  
Christina Lioma
Keyword(s):  
Retrospective Study ◽  
News Media ◽  
Media Coverage ◽  
Significant Positive Correlation ◽  
Media Influence ◽  
Mmr Vaccine ◽  
Vaccination Uptake ◽  
Neutral Media ◽  
Cross Correlations ◽  
The Relationship

BACKGROUND Understanding the influence of media coverage upon vaccination activity is valuable when designing outreach campaigns to increase vaccination uptake. OBJECTIVE To study the relationship between media coverage and vaccination activity of the measles-mumps-rubella (MMR) vaccine in Denmark. METHODS We retrieved data on media coverage (1622 articles), vaccination activity (2 million individual registrations), and incidence of measles for the period 1997-2014. All 1622 news media articles were annotated as being provaccination, antivaccination, or neutral. Seasonal and serial dependencies were removed from the data, after which cross-correlations were analyzed to determine the relationship between the different signals. RESULTS Most (65%) of the anti-vaccination media coverage was observed in the period 1997-2004, immediately before and following the 1998 publication of the falsely claimed link between autism and the MMR vaccine. There was a statistically significant positive correlation between the first MMR vaccine (targeting children aged 15 months) and provaccination media coverage (r=.49, P=.004) in the period 1998-2004. In this period the first MMR vaccine and neutral media coverage also correlated (r=.45, P=.003). However, looking at the whole period, 1997-2014, we found no significant correlations between vaccination activity and media coverage. CONCLUSIONS Following the falsely claimed link between autism and the MMR vaccine, provaccination and neutral media coverage correlated with vaccination activity. This correlation was only observed during a period of controversy which indicates that the population is more susceptible to media influence when presented with diverging opinions. Additionally, our findings suggest that the influence of media is stronger on parents when they are deciding on the first vaccine of their children, than on the subsequent vaccine because correlations were only found for the first MMR vaccine.

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