scholarly journals Dynamic Portfolio Selection on Croatian Financial Markets: MGARCH Approach

2016 ◽  
Vol 7 (2) ◽  
pp. 78-90
Author(s):  
Tihana Škrinjarić ◽  
Boško Šego
Keyword(s):  
Financial Markets ◽  
Portfolio Selection ◽  
Daily Basis ◽  
Bond Market ◽  
Trading Strategies ◽  
Conditional Heteroskedasticity ◽  
Stock Market Index ◽  
Market Index ◽  
Dynamic Portfolio ◽  
Return Dynamics

Abstract Background: Investors on financial markets are interested in finding trading strategies which could enable them to beat the market. They always look for best possibilities to achieve above-average returns and manage risks successfully. MGARCH methodology (Multivariate Generalized Autoregressive Conditional Heteroskedasticity) makes it possible to model changing risks and return dynamics on financial markets on a daily basis. The results could be used in order to enhance portfolio formation and restructuring over time. Objectives: This study utilizes MGARCH methodology on Croatian financial markets in order to enhance portfolio selection on a daily basis. Methods/Approach: MGARCH methodology is applied to the stock market index CROBEX, the bond market index CROBIS and the kuna/euro exchange rate in order to model the co-movements of returns and risks on a daily basis. The estimation results are then used to form successful portfolios. Results: Results indicate that using MGARCH methodology (the CCC and the DCC model) as guidance when forming and rebalancing a portfolio contributes to less portfolio volatility and greater cumulated returns compared to strategies which do not take this methodology into account. Conclusions: It is advisable to use MGARCH methodology when forming and rebalancing portfolios in terms of portfolio selection.

scholarly journals Scale-free tails in colombian financial indexes: a primer

ODEON ◽  
2016 ◽  
pp. 233 ◽  
Author(s):  
Carlos León
Keyword(s):  
Financial Markets ◽  
Heavy Tails ◽  
Maximum Likelihood Method ◽  
Ordinary Least Squares ◽  
Likelihood Method ◽  
Estimation Methods ◽  
Stock Market Index ◽  
Scale Free ◽  
Market Index ◽  
Power Law Exponent

<p>A maximum likelihood method for estimating the power-law exponent verifies that the positive and negative tails of the Colombian stock market index (IGBC) and the Colombian peso exchange rate (TRM) approximate a scale-free distribution, whereas none of the heavy tails of a local sovereign securities index (IDXTES) are a plausible case for such distribution. Results also (i) support critiques regarding the flaws of ordinary least squares estimation methods for scale-free distributions; (ii) question the validity of Zipf’s law; (iii) suggest that IGBC and TRM display the scale-free nature documented as a stylized fact of financial returns, and that they may be following a gradually truncated Lévy flight; and (iv) suggest that local financial markets are self-organizing systems.</p>

scholarly journals An Improved Probabilistic Neural Network Model for Directional Prediction of a Stock Market Index

2019 ◽  
Vol 9 (24) ◽  
pp. 5334 ◽  
Author(s):  
Vasana Chandrasekara ◽  
Chandima Tilakaratne ◽  
Musa Mammadov
Keyword(s):  
Stock Market ◽  
Financial Markets ◽  
Financial Market ◽  
Joint Distribution ◽  
Probabilistic Neural Network ◽  
Stock Market Index ◽  
Multivariate Distributions ◽  
Market Index ◽  
Input Variables ◽  
T Distribution

Financial market prediction attracts immense interest among researchers nowadays due to rapid increase in the investments of financial markets in the last few decades. The stock market is one of the leading financial markets due to importance and interest of many stakeholders. With the development of machine learning techniques, the financial industry thrived with the enhancement of the forecasting ability. Probabilistic neural network (PNN) is a promising machine learning technique which can be used to forecast financial markets with a higher accuracy. A major limitation of PNN is the assumption of Gaussian distribution as the distribution of input variables which is violated with respect to financial data. The main objective of this study is to improve the standard PNN by incorporating a proper multivariate distribution as the joint distribution of input variables and addressing the multi-class imbalanced problem persisting in the directional prediction of the stock market. This model building process is illustrated and tested with daily close prices of three stock market indices: AORD, GSPC and ASPI and related financial market indices. Results proved that scaled t distribution with location, scale and shape parameters can be used as more suitable distribution for financial return series. Global optimization methods are more appropriate to estimate better parameters of multivariate distributions. The global optimization technique used in this study is capable of estimating parameters with considerably high dimensional multivariate distributions. The proposed PNN model, which considers multivariate scaled t distribution as the joint distribution of input variables, exhibits better performance than the standard PNN model. The ensemble technique: multi-class undersampling based bagging (MCUB) was introduced to handle class imbalanced problem in PNNs is capable enough to resolve multi-class imbalanced problem persisting in both standard and proposed PNNs. Final model proposed in the study with proposed PNN and proposed MCUB technique is competent in forecasting the direction of a given stock market index with higher accuracy, which helps stakeholders of stock markets make accurate decisions.

Lead-Lag Relationship between Volatility Index and Stock Market Index

2005 ◽  
Vol 13 (2) ◽  
pp. 87-105
Author(s):  
Jae Ha Lee ◽  
Je Ryun Chung
Keyword(s):  
Stock Market ◽  
Implied Volatility ◽  
Daily Basis ◽  
Sample Period ◽  
Stock Market Index ◽  
Market Index ◽  
Volatility Index ◽  
Asymmetric Response ◽  
Daily Data

This study examines the lead-lag relationship between KOSPI200 and the volatility index based on the implied volatility from the KOSPI200 options. The sample period covers from January 2, 2003 to June 30, 2004. Both daily and minute-by-minute data were used for the lead-lag analysis. The study also determines whether the response of volatil ity index to KOSPI200 is symmetric or not. The most important findings may be summarized as follows. First, there is no lead-lag relationship between the change in volatility index and the KOSPI200 returns on a daily basis. However, on a minute-by-minute basis, volatility index leads KOSPI200 for the group of largest increases in volatility index, and the opposite is true for the group of largest decreases and least changes in volatility index. The option market appears to react more quickly to volatility increases, while the stock market seems more sensitive to volatility decreases. Second, the volatility increase in response to the stock market decline is more severe than the volatility decrease in response to the stock market rise for daily data. This evidence of asymmetry suggests that volatility index plays a role of investors’fear gauge. Our results show no asymmetric response of volatility index to stock market movements for weekly data.

scholarly journals Укључивање акција у индекс // Inclusion of stocks in the index

2013 ◽  
Vol 11 (18) ◽  
pp. 51
Author(s):  
Натко Благојевић ◽  
Силвије Орсаг
Keyword(s):  
Stock Market ◽  
Financial Markets ◽  
Behavioral Finance ◽  
Capital Market ◽  
Stock Price ◽  
Stock Market Index ◽  
Index Funds ◽  
Market Index ◽  
Significant Change ◽  
Trading Volumes

Резиме: Уврштавање у индекс једна је од техничких аномалија у фокусу бихевиористичких финансија која се не може објаснити са становишта традиционалних финансија. Полазећи од глобализације свјетских финансијских тржишта и чињенице да је хрватско тржиште капитала значајно интегрисано с развијеним европским тржиштима капитала, истражили смо постојање значајних промјена цијена акција након њиховог уврштавања у индекс Crobex. Као резултат проведених истраживања, уочили смо значајне промјене цијена акција узроковане њиховим уврштењем у индекс тржишта акција, без значајније промјене обима трговања у ситуацији гдје нема индексних фондова специјализованих за инвестирање у Crobex и гдје је укључивање транспарентно и аутономно од дискреционих одлука.Summary: Index inclusion is one of a technical anomaly in the focus of behavioral finance which cannot be explained from the viewpoint of traditional finance. Starting from globalization of world financial markets and the fact that Croatian capital market is well integrated within developed European capital markets we are investigate existence of significant changes in prices of stock after theirs inclusion in index Crobex . As result of performing researches we find significant change in stock price caused by theirs including in stock market index without significant change in theirs trading volumes in situation where are no index funds specialized for investing in Crobex and where inclusion is transparent and autonomous from discreet decisions.

On the sensibility of the Pairs Trading strategy: the case of the FTS stock market index

2020 ◽  
Vol 38 (3) ◽  
Author(s):  
Ainhoa Fernández-Pérez ◽  
María de las Nieves López-García ◽  
José Pedro Ramos Requena
Keyword(s):  
Standard Deviation ◽  
Stock Market ◽  
Trading Strategy ◽  
Stock Market Index ◽  
Pairs Trading ◽  
Empirical Application ◽  
Statistical Arbitrage ◽  
Market Index ◽  
Standard Deviations ◽  
Using Data

In this paper we present a non-conventional statistical arbitrage technique based in varying the number of standard deviations used to carry the trading strategy. We will show how values of 1 and 1,2 in the standard deviation provide better results that the classic strategy of Gatev et al (2006). An empirical application is performance using data of the FST100 index during the period 2010 to June 2019.

scholarly journals Investors’ Reactions to CSR News in Family Versus Nonfamily Firms: A Study on Signal (In)credibility

2021 ◽  
pp. 104225872110104
Author(s):  
Naciye Sekerci ◽  
Jamil Jaballah ◽  
Marc van Essen ◽  
Nadine Kammerlander
Keyword(s):  
Stock Market ◽  
Event Study ◽  
Family Firms ◽  
Signaling Theory ◽  
Family Firm ◽  
Stock Market Index ◽  
Important Condition ◽  
Post Hoc Analysis ◽  
Market Index ◽  
Post Hoc

We study family firm status as an important condition in signaling theory; specifically, we propose that the market reacts more positively to positive, and more negatively to negative, CSR news (i.e., signals) from family firms than to similar news from nonfamily firms. Moreover, we propose that during recessions, the direction of these relationships reverses. Based on an event study of 1247 positive and negative changes in the CSR ratings for all firms listed on the French SFB120 stock market index (2003-2013), we find support for our hypotheses. Moreover, a post hoc analysis reveals that the relationships are contingent on whether a family CEO leads the firm.

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