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Essays On Asset Pricing And Machine Learning
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Book Synopsis Essays in Asset Pricing and Machine Learning by : Jason Yue Zhu
Download or read book Essays in Asset Pricing and Machine Learning written by Jason Yue Zhu and published by . This book was released on 2021 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: In this thesis we study two applications of machine learning to estimate models that explains asset prices by harnessing the vast quantity of asset and economic information while also capturing complex structure among sources of risk. First we show how to build a cross-section of asset returns, that is, a small set of basis or test assets that capture complex information contained in a given set of characteristics and span the Stochastic Discount Factor (SDF). We use decision trees to generalize the concept of conventional sorting and introduce a new approach to robustly recover the SDF, which endogenously yields optimal portfolio splits. These low-dimensional investment strategies are well diversified, easily interpretable, and reflect many characteristics at the same time. Empirically, we show that traditional cross-sections of portfolios and their combinations, especially deciles and long-short anomaly factors, present too low a hurdle for model evaluation and serve as the wrong building blocks for the SDF. Constructed from the same pricing signals, our cross-sections have significantly higher (up to a factor of three) out-of-sample Sharpe ratios and pricing errors relative to the leading reduced-form asset pricing models. In the second part of the thesis, I present deep neural networks to estimate an asset pricing model for individual stock returns that takes advantage of the vast amount of conditioning information, while keeping a fully flexible form and accounting for time-variation. The key innovations are to use the fundamental no-arbitrage condition as criterion function to construct the most informative test assets with an adversarial approach and to extract the states of the economy from many macroeconomic time series. Our asset pricing model outperforms out-of-sample all benchmark approaches in terms of Sharpe ratio, explained variation and pricing errors and identifies the key factors that drive asset prices.
Book Synopsis Essays in Empirical Asset Pricing with Machine Learning by : Matthias Bûchner
Download or read book Essays in Empirical Asset Pricing with Machine Learning written by Matthias Bûchner and published by . This book was released on 2020 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Essays in Empirical Asset Pricing with Machine Learning by : Matthias Büchner
Download or read book Essays in Empirical Asset Pricing with Machine Learning written by Matthias Büchner and published by . This book was released on 2021 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Essays on Empirical Asset Pricing Via Machine Learning by : Gerrit Liedtke
Download or read book Essays on Empirical Asset Pricing Via Machine Learning written by Gerrit Liedtke and published by . This book was released on 2023 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Essays in Empirical Asset Pricing with Machine Learning by : Felix Kempf
Download or read book Essays in Empirical Asset Pricing with Machine Learning written by Felix Kempf and published by . This book was released on 2022 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Machine Learning in Asset Pricing by : Stefan Nagel
Download or read book Machine Learning in Asset Pricing written by Stefan Nagel and published by Princeton University Press. This book was released on 2021-05-11 with total page 156 pages. Available in PDF, EPUB and Kindle. Book excerpt: A groundbreaking, authoritative introduction to how machine learning can be applied to asset pricing Investors in financial markets are faced with an abundance of potentially value-relevant information from a wide variety of different sources. In such data-rich, high-dimensional environments, techniques from the rapidly advancing field of machine learning (ML) are well-suited for solving prediction problems. Accordingly, ML methods are quickly becoming part of the toolkit in asset pricing research and quantitative investing. In this book, Stefan Nagel examines the promises and challenges of ML applications in asset pricing. Asset pricing problems are substantially different from the settings for which ML tools were developed originally. To realize the potential of ML methods, they must be adapted for the specific conditions in asset pricing applications. Economic considerations, such as portfolio optimization, absence of near arbitrage, and investor learning can guide the selection and modification of ML tools. Beginning with a brief survey of basic supervised ML methods, Nagel then discusses the application of these techniques in empirical research in asset pricing and shows how they promise to advance the theoretical modeling of financial markets. Machine Learning in Asset Pricing presents the exciting possibilities of using cutting-edge methods in research on financial asset valuation.
Book Synopsis Essays on Asset Pricing and Machine Learning by : Matteo Bagnara
Download or read book Essays on Asset Pricing and Machine Learning written by Matteo Bagnara and published by . This book was released on 2023 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Essays in Machine Learning Applications for Asset Pricing by : Yavor Kovachev
Download or read book Essays in Machine Learning Applications for Asset Pricing written by Yavor Kovachev and published by . This book was released on 2021 with total page 142 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Essays on the Application of Machine Learning Techniques in the Empirical Asset Pricing Research by : Tizian Otto
Download or read book Essays on the Application of Machine Learning Techniques in the Empirical Asset Pricing Research written by Tizian Otto and published by . This book was released on 2022 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Essays on Conditional Asset Pricing and Machine Learning in Finance by : Stephen Owen
Download or read book Essays on Conditional Asset Pricing and Machine Learning in Finance written by Stephen Owen and published by . This book was released on 2021 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: In recent years there has been wide-scale access to improved statistical estimation techniques and the implementation of such techniques in financial economics. In this dissertation, I provide two brief overviews of the evolution of linear factor models in asset pricing and machine learning in finance. I then provide four research essays that implement machine learning in financial economic research settings. The first essay revisits tests of the conditional Capital Asset Pricing Model in an international context using multivariate generalized autoregressive conditional heteroskedasticity techniques. The second essay studies the use of hierarchical clustering in mean-variance optimal portfolio management. The third essay proposes a novel paragraph embedding technique that leverages the question-and-answer structure of earnings announcement calls to model the similarity between documents. The fourth and final essay studies the impact that dodgy managers have on idiosyncratic security performance.
Book Synopsis Machine Learning for Asset Management and Pricing by : Henry Schellhorn
Download or read book Machine Learning for Asset Management and Pricing written by Henry Schellhorn and published by SIAM. This book was released on 2024-03-26 with total page 267 pages. Available in PDF, EPUB and Kindle. Book excerpt: This textbook covers the latest advances in machine learning methods for asset management and asset pricing. Recent research in deep learning applied to finance shows that some of the (usually confidential) techniques used by asset managers result in better investments than the more standard techniques. Cutting-edge material is integrated with mainstream finance theory and statistical methods to provide a coherent narrative. Coverage includes an original machine learning method for strategic asset allocation; the no-arbitrage theory applied to a wide portfolio of assets as well as other asset management methods, such as mean-variance, Bayesian methods, linear factor models, and strategic asset allocation; recent techniques such as neural networks and reinforcement learning, and more classical ones, including nonlinear and linear programming, principal component analysis, dynamic programming, and clustering. The authors use technical and nontechnical arguments to accommodate readers with different levels of mathematical preparation. The book is easy to read yet rigorous and contains a large number of exercises. Machine Learning for Asset Management and Pricing is intended for graduate students and researchers in finance, economics, financial engineering, and data science focusing on asset pricing and management. It will also be of interest to finance professionals and analysts interested in applying machine learning to investment strategies and asset management. This textbook is appropriate for courses on asset management, optimization with applications, portfolio theory, and asset pricing.
Book Synopsis Essays on Asset Pricing by : Gabriel Ignacio Cuevas Rodriguez
Download or read book Essays on Asset Pricing written by Gabriel Ignacio Cuevas Rodriguez and published by . This book was released on 2023 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: In Chapter 1, I analyze firms' misallocation through the output distortions channel, using a production-based asset pricing model as a framework. In the model, alpha measures the firm's ability to choose technologies to adapt to exogenous shocks. I find in the cross-section of the test portfolios the estimated curvature parameter alpha is more than two times the original value obtained in Belo (2010). This implies misallocations reduce the firm's ability to respond to the different states of nature. I calibrate and solve the model in the special case of a single representative firm. I find that the impact of misallocation on firm value, production, capital, investment, and investment return is larger when firms' ability to adapt to exogenous shocks is reduced. This indicates that firms may be less agile to adapt across states of nature and provides more evidence of the detrimental effect of misallocations. In Chapter 2 (with Denis Mokanov and Danyu Zhang), we document several facts about equity analysts' earnings expectations: (1) consensus earnings expectations underreact to news unconditionally, (2) the degree of underreaction declines during high-volatility periods, and (3) the degree of underreaction declines over our sample. To account for these findings, we develop a simple model featuring time-varying inattention. We show that our model is able to account for the unconditional profitability of momentum, momentum crashes, and the diminishing profitability of momentum over our sample. We propose a trading strategy that mixes short-run and long-run momentum signals and show that the mixed momentum strategy outperforms the conventional momentum strategies. Finally, we use a machine learning algorithm to estimate the predictable component of earnings surprises and construct a portfolio that is long (short) on stocks with excessively pessimistic (optimistic) earnings expectations. The resultant trading strategy generates an annualized Sharpe ratio of about 1.16 and its returns are not explained by popular factor models.
Book Synopsis Three Essays on Asset Pricing in Regime and ESG Environments by : Zongming Ma
Download or read book Three Essays on Asset Pricing in Regime and ESG Environments written by Zongming Ma and published by . This book was released on 2019 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: Asset pricing has been a focal point among a broad range of financial studies. Traditional asset pricing models are encountering challenges by empirical data and sustainable compliance. For example, the Black-Scholes-Merton (BSM) model exhibits the "volatility smile" puzzle and the role that sustainability plays in accounting for asset pricing remains controversial. Based on these observations, I raise three research questions. First, can an option valuation model with a pricing kernel that depends on market regimes address volatility smile and be consistent with observed market prices? Second, how do the Environment, Social and Governance (ESG) ratings affect asset prices across different economic sectors, firm sizes, and time horizons? Third, since the macroeconomic environment affects firms' strategies and financial performance, how do ESG ratings affect stock returns across market regimes? I address these questions in three essays. The first essay reveals that the proposed model can predict the market option prices more accurate than the alternative models (Black-Scholes-Merton, Heston-Nandi, Hardy) do for both the in-sample and out-of-sample data across regimes. The second essay finds that ESG ratings have a positive effect on stock returns, particularly for sensitive industries (gas, oil, chemical, mining, alcohol, and tobacco, etc.), for large capitalization firms, and for long-term investment horizons. The third essay uses a machine learning method to identify market regime using 134 macroeconomic factors and a factor model to discover a positive relationship between ESG and asset returns in the bear regime. The factor model also show that the impact of ESG rating on stock returns in a sector, given a market regime, depends significantly on the level of demand in that sector under that market regime.
Book Synopsis Essays on Asset Pricing and Learning Foundations of Equilibrium by : Alvaro Sandroni
Download or read book Essays on Asset Pricing and Learning Foundations of Equilibrium written by Alvaro Sandroni and published by . This book was released on 1996 with total page 276 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Essays in Learning and Asset Pricing by : Arunima Sinha
Download or read book Essays in Learning and Asset Pricing written by Arunima Sinha and published by . This book was released on 2010 with total page 392 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Essays in Asset Pricing with Belief Dispersion and Learning by : Adem Atmaz
Download or read book Essays in Asset Pricing with Belief Dispersion and Learning written by Adem Atmaz and published by . This book was released on 2015 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Essays on Asset Pricing by : Ching Tai Watson
Download or read book Essays on Asset Pricing written by Ching Tai Watson and published by . This book was released on 2004 with total page 304 pages. Available in PDF, EPUB and Kindle. Book excerpt:
