1. Motivation Imagine you're a trader who's about to put on a position for the next month. You want to hedge away the risk in this position associated with daily fluctuations in market returns. One way that you might do this would be to short the … [Continue reading]
1. Motivation This post investigates the distribution of subject tags for Wall Street Journal articles that mention S&P 500 companies. e.g., a December 2009 article entitled, When Even Your Phone Tells You You're Drunk, It's Time to Call a … [Continue reading]
1. Motivation How much can traders learn from past price signals? It depends on what kind of assets sell. Suppose that returns are (in part) a function of $K = \Vert {\boldsymbol \alpha} \Vert_{\ell_0}$ different feature-specific … [Continue reading]
1. Introduction In this post I work through the main results in Ang, Hodrick, Xing, and Zhang (2006) which shows not only that i) stocks with more exposure to changes in aggregate volatility have higher average excess returns, but also that ii) … [Continue reading]
1. Introduction The empirical content of the discount factor view of asset pricing can all be derived from the equation below: \begin{align} 0 = \mathrm{E}[m \cdot r_n] \quad \text{for all } … [Continue reading]