Luke De Clerk, Sergey Savel'ev
arXiv 24 Mar 2021 · Econometrics · publishedHeliyon (2022) · 2 citations (OpenAlex)
arXiv:2103.13199 · PDF · DOI · OpenAlex · Extracted main text
Here, we analyse the behaviour of the higher order standardised moments of financial time series when we truncate a large data set into smaller and smaller subsets, referred to below as time windows. We look at the effect of the economic environment on the behaviour of higher order moments in these time windows. We observe two different scaling relations of higher order moments when the data sub sets' length decreases; one for longer time windows and another for the shorter time windows. These scaling relations drastically change when the time window encompasses a financial crisis. We also observe a qualitative change of higher order standardised moments compared to the gaussian values in response to a shrinking time window. We extend this analysis to incorporate the effects these scaling relations have upon risk. We decompose the return series within these time windows and carry out a Value-at-Risk calculation. In doing so, we observe the manifestation of the scaling relations through the change in the Value-at-Risk level. Moreover, we model the observed scaling laws by analysing the hierarchy of rare events on higher order moments.
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The works this paper leans on most, across its whole bibliography — not restricted to papers in our corpus. Ranked by composite intensity, which combines how often a work is mentioned, how many sections mention it, and how much of that falls in the main text rather than the appendix.
| Reference | Intensity | Mentions | Sections | Main text | |
|---|---|---|---|---|---|
| 1 | L. D. Clerk and S. Savel'ev, “Non-stationary modelling of garch to f… (2021) Non-stationary modelling of garch to fit higher order moments of financial series within fixed time windows self | 0.843 | 3 | 3 | 100% |
| 2 | R. Mantegna and H. Stanley, An Introduction to Econophysics, C. U. P… (2000) vol | 0.511 | 2 | 1 | 100% |
| 3 | F. Black and M. Scholes, “The pricing of options and corporate liabi… (1973) The pricing of options and corporate liabilities | 0.405 | 1 | 1 | 100% |
| 4 | R. C. Merton, “Theory of rational option pricing,” Journal of Econom… (1973) Theory of rational option pricing | 0.405 | 1 | 1 | 100% |
| 5 | W. Breen, L. Glosten, and R. Jagannathan, “Economic significance of… (1989) Economic significance of predictable variations in stock index returns | 0.405 | 1 | 1 | 100% |
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| 7 | G. Perez-Quiros and A. Timmerman, “Business cycle asymmetries in sto… (2001) Business cycle asymmetries in stock returns: Evidence of higher order moments and conditional densities | 0.405 | 1 | 1 | 100% |
| 8 | M. Sihem and H. Slaheddine, “The impact of higher order moments on m… (2014) The impact of higher order moments on market risk assessment | 0.405 | 1 | 1 | 100% |
| 9 | C. R. Harvey, J. C. Liechty, M. W. Liechty, and P. Müller, “Portfoli… (2010) Portfolio selection with higher order moments | 0.405 | 1 | 1 | 100% |
| 10 | F. Javed, S. Mazur, and E. Ngalio, “Higher order moments of the esti… Higher order moments of the estimated tangency portfolio weights | 0.405 | 1 | 1 | 100% |
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