Fama and French (1992) show that size and book-to-price dominate CAPM beta and other variables such as the price-earnings ratio and dividend yield in explaining the cross-section of US stock returns. Comparable evidence for the UK points to a book-to-price effect, but not a size effect (Chan and Chui, 1996; Strong and Xu, 1997). In this paper, our first contribution is to show that a measure of...

A valuation model is presented for options on stocks for which BlackScholes arbitrage does not entirely eliminate risk. The price dynamics of a portfolio of options and the underlying security is quanti ed by requiring that the excess reward-to-risk ratio of the portfolio be identical to that of the underlying stock: excess return risk portfolio = excess return risk stock : The nonlinear evolut...

It is a common wisdom that individual stocks’ returns are difficult to predict, though in many situations it is important to have such estimates at our disposal. In particular, they are needed to determine the cost of capital. Market equilibrium models posit that expected returns are proportional to the sensitivities to systematic risk factors. Fama and French (1993) three-factor model explains...

Changes in stock price will be influenced by many aspects of factors. When we are predicting stock price, it is difficult to build a determined mathematical model between stock prices and these complex factors. This paper first utilizes ε − SVM (ε − support vector machine) to build a stock price prediction model. By fitting the prediction error sequence, we find the law factors, which the predi...

Thomas A. Rietz (1988) proposes that the possibility of rare disasters (such as economic depressions or wars) is a major determinant of asset risk premia. Robert J. Barro (2006) shows that, internationally, disasters have been sufficiently frequent and large enough to make the Rietz proposal viable, and they account for a high equity premium. The Rietz-Barro hypothesis is almost always formulat...

one of the latest approaches for analyzing the coupled time series is mf-dxa. this technique has been used in many disciplines such as finance. in this paper, we have analyzed tehran stock exchange indexes by mf-dxa and have found a scaling behavior between the industrial, financial and price indexes. by surrogating, we could see that the effects of low probability events in industrial and fina...

An optimal investment problem is solved for an insider who has access to noisy information related to a future stock price, but who does not know the stock price drift. The drift is filtered from a combination of price observations and the privileged information, fusing a partial information scenario with enlargement of filtration techniques. We apply a variant of the Kalman-Bucy filter to infe...

STOCK market price behavior has been studied extensively. It is influenced by a myriad of factors, including political and economic events, among others, and is a complex nonlinear time-series problem. Traditionally, stock price forecasting is performed based on technical analysis, which focuses on price action, which is the process of finding patterns in price history. More recently, research ...

With the characteristics of nonlinearity and randomness, stock prices change with a strong feature of disorder, and its mathematical model is often complex which makes it difficult to accurately determine the price or contain chaos. One single forecast method can only describe the stock price information partially, but fails to reflect the overall picture. In this paper, a method of Radial Basi...