Financial econometrics, mathematics, statistics, and financial technology: an overall view

  • Published: 22 April 2020
  • Volume 54 , pages 1529–1578, ( 2020 )

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  • Cheng Few Lee 1  

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Based upon my experience in research, teaching, writing textbooks, and editing handbooks and journals, this review paper discusses how financial econometrics, mathematics, statistics, and financial technology can be used in research and teaching for students majoring in quantitative finance. A major portion of this paper discusses essential content of Lee and Lee (Handbook of financial econometrics, mathematics, statistics, and machine learning, World Scientific, Singapore, 2020). Then Lee (From east to west: memoirs of a finance professor on academia, practice, and policy, World Scientific, Singapore, 2017), Lee et al. (Financial econometrics, mathematics and statistics, Springer, New York, 2019a; Machine learning for predicting default of credit card holders and success of kickstarters. Working paper, 2019b), and Lee and Lee (Handbook of financial econometrics and statistics, Springer, New York, 2015) are used to enhance the content of this paper. In addition, important and relevant papers, which have been published in different journals are also used to support the issues discussed in this paper. I have found the applications of financial econometrics, mathematics, statistics, and technology have improved drastically over the last five decades. Therefore, both practitioners and academicians need to update their skills in this area to compete in both financial market and academic research.

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This paper was delivered as a keynote speech at the 27th PBFEAM Conference in June 2019 at National Taiwan University. I appreciate the comments from the audience at the conference. In addition, the useful comments from Professors J. R. Chang, Cathy Y. H. Chen, Jack Francis, Wolfgang Karl Hardle, Nathan Joseph, Fu-Lai Lin, Xiaoxiao Tang, and Hai-Chin Yu are also appreciated.

Appendix 1: Table of contents and keywords for the handbook entitled “Financial econometrics, statistics, technology and machine learning” (World Scientific 2020)

This appendix will cover the table of contents and important keywords for this handbook. Part A of this appendix covers the table of contents and Part B covers the keywords.

1.1 Part A: table of contents


Do Managers Use Earnings Forecasts to Fill a Demand They Perceive From Analysts? by Orie Barron, Jian Cao, Xuguang Sheng, Maya Thevenot, and Baohua Xin

A potential benefit of increasing book–tax conformity: Evidence from the reduction in audit fees by Nantin Kuo and Cheng-Few Lee

Gold in Portfolio: A Long-Term or Short-Term Diversifier? by Fu-Lai Lin, Sheng Yung Yang, and Yu-Fen Chen

Econometric Approach To Financial Analysis, Planning, And Forecasting By Cheng-Few Lee

Forecast Performance of the Taiwan Weighted Stock Index: Update and Expansion by Deng-Yuan Yi, Hsiao-Yin Chen, and Cheng-Few Lee

Statistical Distributions and Option Bound Determination by Cheng-Few Lee and Peter Guangping Zhang

Measuring the collective correlation of a large number of stocks by Wei-Fang Niu and Henry Horng-Shing Lu

Key Borrowers Detected by the Intensities of Their Interactions by Fuad Aleskerov, Irina Andrievskaya, Alisa Nikitina, and Sergey Shvydun

Application of the Multivariate Average F Test to Examine Relative Performance of Asset Pricing Models with Individual Security Returns by Shafiqur Rahman and Matthew J. Schneider

Hedge Ratio and Time Series Analysis by Sheng-Syan Chen, Cheng-Few Lee, and Keshab Shresth

Applications of Intertemporal CAPM on International Corporate Finance and Mutual Fund Research by JR Chang, Cheng-Few Lee, and M W Huang

What Drives Variation in the International Diversification Benefits? A Cross-country Analysis” by Wan-Jiun Paul Chiou and Kuntara Pukthuanthong

A heteroskedastic Black-Litterman portfolio optimization model with views derived from a predictive regression by Wei-Hung Lin, Huei-Wen Teng, and Chi-Chun Yang

Pricing Fair Deposit Insurance: Structural Model Approach by Tzu Tai, Cheng-Few Lee, Tian-Shyr Dai, Keh Luh Wang, and Hong-Yi Chen

Application of Structural Equation Modeling in Behavioral Finance: A Study on the Disposition Effect by Chang Hsin-Hue

External Financing Needs and Early Adoption of Accounting Standards: Evidence from the Banking Industry by Sophia I-Ling Wang

Improving the Stock Market Prediction with Social Media via Broad Learning by Xi Zhang and Philip S. Yu

Sourcing Alpha In Global Equity Markets: Market Factor Decomposition And Market Characteristics by Dr. S.S. Mohanty

Support Vector Machines Based Methodology for Credit Risk Analysis by Jianping Li, Mingxi Liu, Cheng-Few Lee, and Dengsheng Wu

Data Mining Applications in Accounting and Finance Context by Wikil Kwak, Yong Shi, and Cheng-Few Lee

Tradeoff between reputation concerns and economic dependence for auditors—Threshold regression approach by Fang-Chi Lin, Chin-Chen Chien, Cheng-Few Lee, Hsuan-Chu Lin, and Yu-Cheng Lin

The ASEAN Economic Community: Analysis Based On Fractional Integration And Cointegration by Luis Alberiko Gil-Alana, University of Navarra and Hector Carcel, Bank of Lithuania

Alternative Methods for Determining Option Bounds: A Review and Comparison by Cheng-Few Lee, Zhaodong Zhong, Tzu Tai,and Hongwei Chuang

Financial Reforms and The Differential Impact of Foreign versus Domestic Banking Relationships on Firm Value by Hai-Chin Yu, Cheng-Few Lee and Ben Sopranzetti

Time-Series Analysis: Components, Models, and Forecasting by Cheng-Few Lee

Itô’s Calculus and the Derivation of the Black Option-Pricing Model-Scholes by Malliaris A.G. and George Chalamandaris

Durbin-Wu-Hausman Specification Tests by Robert H. Patrick

Jump Spillover and Risk Effects on Excess Returns in the United States During the Great Recession by Jessica Schlossberg and Norman R. Swanson

Earnings Forecasts and Revisions, Price Momentum, and Fundamental Data: Further Exploration of Financial Anomalies by John B. Guerard Jr. and Andrew Mark

Ranking Analysts by Network Structural Hole by Re-Jin Guo, Yingda Lu, and Lingling Xie

The Association Between Book-Tax Differences and CEO Compensation by Kin-Wai Lee and Gillian Hian-Heng Yeo

Stochastic Volatility Models: Faking a Smile by Dean Diavatopoulos and Oleg Sokolinskiy

Entropic Two-Asset Option by Tumellano Sebehela

The Joint Determinants of Capital Structure and Stock Rate of Return: A LISREL Model Approach by Hong-Yi Chen, Cheng-Few Lee and Tzu Tai

Time–Frequency Wavelet Analysis of Stock Market Co-Movement Between and Within Geographic Trading Blocs by Bilel Kaffel and Fathi Abid

Alternative errors-in-variables models and their applications in finance research by Hong-Yi Chen, Alice C. Lee, and Cheng-Few Lee

Simultaneously Capturing Multiple Dependence Features in Bank Risk Integration: A Mixture Copula Framework by Xiaoqian Zhu, Dengsheng Wu, Jianping Li

GPU Acceleration for Computational Finance by Chuan-Hsiang Han

Does VIX Truly Measure Return Volatility? by K. Victor Chow, Wanjun Jiang, and Jingrui Li

An ODE approach for the expected discounted penalty at ruin in a jump-diffusion model by Yu-Ting Chen, Cheng-Few Lee, and Yuan-Chung Sheu

How Does Investor Sentiment Affect Implied Risk-Neutral Distributions of Call and Put Options? by Wen-Ming Szu, Yi-Chen Wang, and Wan-Ru Yang

Intelligent Portfolio Theory and Strength Investing in the Confluence of Business & Market Cycles and Sector & Location Rotations by Heping Pan

Evolution Strategy Based Adaptive Lq Penalty Support Vector Machines with Gauss Kernel for Credit Risk Analysis by Jianping Li, Gang Li, Dongxia Sun, and Cheng-Few Lee

Product Market Competition And CEO Pay Benchmarking by Ivan E. Brick and Darius Palia

Equilibrium Rate Analysis of Cash Conversion Systems: The Case of Corporate Subsidiaries by Weiwei Chen, Benjamin Melamed, Oleg Sokolinskiy, and Ben Sopranzetti

Is the market portfolio mean–variance efficient? by Robert R. Grauer

Consumption-Based Asset Pricing with Prospect Theory and Habit Formation by Jr-Yan Wang and Mao-Wei Hung

An Integrated Model for the Cost-Minimizing Funding of Corporate Activities over Time by Prof. Manak C. Gupta

Empirical Studies of Structural Credit Risk Models and the Application in Default Prediction: Review and New Evidence by Han-Hsing Lee, Ren-Raw Chen, and Cheng-Few Lee

Empirical Performance of the Constant Elasticity Variance Option Pricing Model by Ren Raw Chen, Cheng-Few Lee, and Han-Hsing Lee

The Jump Behavior of Foreign Exchange Market: Analysis of Thai Baht by Jow-Ran Chang, Mao-Wei Hung,Cheng-Few Lee, and Hsin-Min Lu

The Revision Of Systematic Risk On Earnings Announcement In The Presence of Conditional Heteroscedasticity by Chin-Chen Chien, Cheng-Few Lee, and She-Chih Chiu

Applications of Fuzzy Set to International Transfer Pricing and Other Business Decisions by Wikil Kawk and Yong Shi, Seesok Lee and Cheng-few Lee

A time-series bootstrapping simulation method to distinguish sell-side analysts’ skill from luck by Chen Su and Hanxiong Zhang

Acceptance Of New Technologies By Employees In Financial Industry by Veronika Belousova, Vasily Solodkov, Nikolay Chichkanov, and Ekaterina Nikiforova

Alternative Method for Determining Industrial Bond Ratings: Theory and Empirical Evidence by Lie-Jane Kao and Cheng-Few Lee

An Empirical Investigation of the Long Memory Effect on the Relation of Downside Risk and Stock Returns by Cathy Yi-Hsuan Chen and Thomas C. Chiang

Analysis of Sequential Conversions of Convertible Bonds: A Recurrent Survival Approach by Lie-Jane Kao, Li-Shya Chen, and Cheng-Few Lee

Determinants of euro-area bank CDS spreads by Maria-Eleni K. Agoraki, Dimitris A. Georgoutsos, and George T. Moratis

Dynamic Term Structure Models Using Principal Components Analysis Near The Zero Lower Bound by Januj A. Juneja

Effects Of Measurement Errors On Systematic Risk And Performance Measure Of A Portfolio by Cheng-Few Lee and Frank C. Jen

Forecasting Net Charge-Off Rates of Banks: A PLS Approach by James R. Barth, Sunghoon Joo, Hyeongwoo Kim, Kang Bok Lee, Stevan Maglic, and Xuan Shen

Application of Filtering Methods in Asset Pricing by Hao Chang and Yangru Wu

Sampling Distribution of the Relative Risk Aversion Estimator: Theory and Applications by Marvin J. Karson, David C. Cheng, And Cheng-Few Lee

Social Media, Bank Relationships and Firm Value by Chia-Hui Chao and Hai-Chin Yu

Splines, Heat, and IPOs: Advances in the Measurement of Aggregate IPO Issuance and Performance by Zachary A. Smith, PhD, Mazin A. M. Al Janabi, PhD, and Muhammad Z. Mumtaz, PhD

The Effects Of The Sample Size, The Investment Horizon And Market Conditions On The Validity Of Composite Performance Measures: A Generalization by Son-Nan Chen and Cheng-Few Lee

The Sampling Relationship Between Sharpe’s Performance Measure And Its Risk Proxy: Sample Size, Investment Horizon And Market Conditions by Son-Nan Chen and Cheng-Few Lee

VG NGARCH versus GARJI Model For Asset Price Dynamics by Lie-Jane Kao and Cheng-Few Lee

Why Do Smartphones And Tablets Users Adopt Mobile Banking by Veronika Belousova and Nikolay Chichkanov

Non-parametric Inference on Risk Measures for Integrated Returns by Henghsiu Tsai, Hwai-Chung Ho, and Hung-Yin Chen

Copulas And Tail Dependence In Finance by Wing-Choong Lai and Kim-Leng Goh

Some Improved Estimators of Maximum Squared Sharpe Ratio by Siu Kai Choy and Bu-qing Yang

Errors-in-Variables and Reverse Regression by Shafiqur Rahman and Cheng-Few Lee

The role of financial advisors in M&As: Do domestic and foreign advisors differ? by Kai-Shi Chuang

Discriminant Analysis, Factor Analysis, And Principal Component Analysis: Theory, Method, And Applications by Cheng-Few Lee

Credit Analysis, Bond Rating Forecasting, And Default Probability Estimation by Cheng-Few Lee

Market Model, CAPM, And Beta Forecasting by Cheng-Few Lee

Utility Theory, Capital Asset Allocation, and Markowitz Portfolio-Selection Model by Cheng-Few Lee

Single-Index Model, Multiple-Index Model, and Portfolio Selection by Cheng-Few Lee

Sharpe Performance Measure and Treynor Performance Measure Approach to Portfolio Analysis by Paul Chiou and Cheng-Few Lee

Options and Option Strategies: Theory and Empirical Results by Cheng-Few Lee

Decision Tree and Microsoft Excel Approach for Option Pricing Model by Jow-Ran Chang and John Lee

Statistical Distributions, European Option, American Option, and Option Bounds by Cheng-Few Lee

A Comparative Static Analysis Approach to Derive Greek Letters: Theory and Applications by Cheng-Few Lee

Fundamental Analysis, Technical Analysis, and Mutual Fund Performance by Cheng-Few Lee

Bond Portfolio Management, Swap Strategy, Duration, and Convexity by Cheng-Few Lee

Synthetic Options, Portfolio Insurance, and Contingent Immunization by Cheng-Few Lee

Alternative Security Valuation Model: Theory and Empirical Results by Cheng-Few Lee

Opacity, Stale Pricing, Extreme Bounds Analysis, and Hedge Fund Performance: Making Sense of Reported Hedge Fund Returns by Zachary A. Smith, Mazin A. M. Al Janabi, Muhammad Z. Mumtaz

Does Quantile Co-integration Exist between Spot and Futures Gold Prices? by Hai-Chin Yu, Chia-Ju Lee, and Der-Tzon Hsieh

Bayesian Portfolio Mean–Variance Efficiency Test with Sharpe Ratio’s Sampling Error, by LieJane Kao, Huei Ching Soo and Cheng-Few Lee

Does Revenue Momentum Drive or Ride Earnings or Price Momentum? by Hong-Yi Chen, Sheng-Syan Chen, Chin-Wen Hsin and Cheng-Few Lee

Technical, Fundamental, and Combined Information for Separating Winners from Losers, by Hong-Yi Chen, Cheng-Few Lee, and Wei K. Shih.

Optimal Payout Ratio under Uncertainty and the Flexibility Hypothesis: Theory and Empirical Evidence by Cheng-Few Lee, Manak C. Gupta, Hong-Yi Chen, and Alice C. Lee.

Sustainable Growth Rate, Optimal Growth Rate, and Optimal Payout Ratio: A Joint Optimization Approach by Hong-Yi Chen, Manak C. Gupta, Alice C. Lee and Cheng-Few Lee

Cross-sectionally correlated measurement errors in two-pass regression tests of asset-pricing models by Thomas Gramespacher, Armin Bänziger, and Norbert Hilber

“Asset Pricing with Disequilibrium Price Adjustment: Theory and Empirical Evidence,” (with Chiung-Min Tsai and Alice C. Lee), Quantitative Finance , Volume 13, Number 2, Pages 227–240, 2013.

“A Dynamic CAPM with Supply Effect Theory and Empirical Results,” (with Chiung-Min Tsai and Alice C. Lee), Quarterly Review of Economic and Finance , Volume 49, Issue 3, August 2009, Pages 811–828.

Estimation Procedures of Using Five Alternative Machine Learning Methods for Predicting Credit Card Default by Michael Lee and Huei-Wen Teng

Alternative Methods to Derive Option Pricing Models: Review and Comparison by Cheng-Few Lee and Yibing Chen

“Option Prices and Stock Market Momentum: Evidence from China” with Jianping Li, Yanzhen Yao, and Yibing Chen, Quantitative Finance, Published online: 23 Apr 2018

Advancement of Optimal Portfolios with Short-sales and Transaction Costs: Modeling and Effectiveness by Paul Chiou and Jing-RungYu

The path leading up to the new IFRS 16 leasing standard: how was the restructuring of lease accounting received by different advocacy groups? By Christian Blecher and Stephanie Kruse

Implied Variance Estimates For Black–Scholes And CEV OPM: Review And Comparison by Cheng-Few Lee, Yibing Chen,and John Lee

Crisis Impact on Stock Market Predictability by Rajesh Mohnot

How Many Good and Bad Funds Are there, Really? Wayne Ferson and Yong Chen

Constant Elasticity Of Variance Option Pricing Model: Integration And Detailed Derivation by Y.L. Hsu, T.I. Lin, and Cheng-Few Lee

An Integral-Equation Approach For Defaultable Bond Prices With Application To Credit Spreads by Yu-Ting Chen, Cheng-Few Lee, and Yuan-Chung Sheu

Sample Selection Issues and Applications by Hwei-Lin Chuang and Shih-Yung Chiu

Time Series and Neural Network Analysis by K. C. Tseng, Ojoung Kwon, and Luna C. Tjung

Covariance Regression Model for Non-normal Data by Tao Zou, Ronghua Luo,Wei Lan and Chih-Ling Tsai

Impacts of Time Aggregation on Beta Value and R Squared Estimations Under Additive and Multiplicative Assumptions: Theoretical Results and Empirical Evidence by Yuanyuan Xiao, Yushan Tang, and Cheng-Few Lee

Large-sample Theory by Sunil S. Poshakwale and Anandadeep Mandal

Impacts of Measurement Errors on Simultaneous Equation Estimation of Dividend and Investment Decisions by Cheng-Few Lee and Fu-Lai Lin

Big data and Artificial Intelligence in Banking Industry by T. Robert Yu and Xuehu (Jason) Song

A Non-Parametric Examination of Emerging Markets Financial Integration by Ke Yang, Susan Wahab, Bharat Kolluri, and Mahmoud Wahab

ALAN—Algorithmic Analyst An application for Artificial Intelligence Content as a Service by Ted Hong, Daniel Lee, Wen-Ching Wang

Survival Analysis: Theory and Applications in Finance by Feng Gao and Xiaomin He

Pricing Liquidity in the Stock Market by Ding Du and Ou Hu

The Evolution of Capital Asset Pricing Models: Update and Extension by Yi-Cheng Shih, Sheng-Syan Chen, Cheng-Few Lee, and Po-Jung Chen

The Multivariate GARCH Model and Its Application to East Asian Financial Market Integration by Yoshihiko Tsukuda, Junji Shimada, and Tatsuyoshi Miyakoshi

Review of Difference-in-Difference Analyses in Social Sciences: Application in Policy Test Research by William H. Greene and Min (Shirley) Liu

Using Smooth Transition Regressions to Model Risk Regimes by Liam A. Gallagher, Mark C. Hutchinson, and John O’Brien

Application of Discriminant Analysis, Factor Analysis, Logistic Regression, and KMV-Merton Model in Credit Risk Analysis by Cheng-Few Lee

Predicting Credit Card Delinquencies: An Application of Deep Neural Networks by Ting Sun and Miklos A. Vasarhalyi

Estimating the Tax-Timing Option Value of Corporate Bonds by Peter Huaiyu Chen, Sheen Liu, and Chunchi Wu

DCC-GARCH Model for Market and Firm-Level Dynamic Correlation in S&P 500 by Peimin Chen, Chunchi Wu, and Ying Zhang

Using Path Analysis to Integrate Accounting and Non-Financial Information: The Case for Revenue Drivers of Internet Stocks by Anthony Kozberg

The Implications Of Regulation In The Community Banking Sector: Risk And Competition by Gregory McKee and Albert Kagan

1.2 Part B: Keywords

The number following each keyword indicates the chapter where the keyword can be found.

Accounting beta (79), Acquisitions (116), Adaptive penalty (44), Additive and Multiplicative Rates of Return (114), Advocacy Groups (105), AI Content as a Service (AICaaS) (119), Algorithmic bias (117), American option (84, 85), American options (24), Analyst coverage network (31), Analyst recommendation revisions (55), Analysts’ information (2), Analytic hierarchy process (21), Announcement returns (76), Approximation Approach (106), ARCH (119), ARCH & GARCH (107), ARCH (Autoregressive conditional heteroscedasticity) (11), ARCH method (11), Archimedean copula (73), ARIMA (119), ARIMA-GARCH model (6), ARIMA models (87), Artificial intelligence (101, 117, 127), Artificial Regression (28), ASEAN (23), Asian financial crisis (52), Asset (100), Asset allocation (80), Asset Portfolio (43), Asset pricing (10, 12, 98), Asset Pricing Tests (1), Asymmetric Information (66), Asymmetric taxes (128), Audit fees (3, 22), Audit opinion prediction (21), Auditor change (21), Auditor independence (22), Auditor reputation (22), and Autoregressive forecasting model (26).

Balance of trade (23), Bank credit risk (60), Bank regulatory compliance (117), Bank Relationships (66), Bank risk (38), Banking (56), Bankruptcy (15, 21), Banks (17), Barrier option (15), Basel committee on banking supervision (38), Bayes estimation (74), Bayes factor (93), Bayes rule (108), Bayesian Approach (37), Bayesian factor (52), Bayesian net (21), Bayesian test (93), Behavior finance (122), Behavioral finance (16), Beta coefficient (81), Betting Against Beta (19), Big data (21, 117), Binomial option pricing model (84, 102), Bipower variation tests (29), Black-Litterman model (14), Black–Scholes model (84), Black–Scholes option pricing model (102), Bond price (110), Bond strategies (88), Book–tax conformity (3), Book-tax differences (32), Book-to-market (10, 121), Booting (101), Bootstrap (108), BOS ratio (95), Box–Cox transformation (1), and Box-Jenkins ARIMA Methodology (112).

Calendar (Time) Spreads (83), Calibration (33), Call option (84), Capital Asset Pricing Model (19, 37), Capital gain (128), Capital structure (35, 37), Capital-Rationed Firms (46), CAPM (53, 79, 100), CARA utility function (11), Cash Conversion Cycle (46), Cash Conversion System (46), Causal inference (124), Centrality (9), CEO compensation (32, 45), CEO talent (45), CEV Model (106), China (21), Classical Method (37), Clayton copula (73), Clustering effect model (1), Coefficient Determination (114), Cognitive biases (16), Coincident indicators (26), Co-integration and error assertion method effectiveness (11), Collar (83), Collective correlation (8), Combination forecasting model (6), Combined investment strategy (95), Comment Letters (105), Commodity diversifier (4), Common stock valuation (90), Commonality (2), Community bank (131), Component analysis (87), Composite forecasting (79, 87), Computational finance (39), Concave utility function (80), Conditional multivariate F test (93), Conditional tail expectation (72), Conditional Value at Risk model (104), Confidence index (87), Confirmatory factor analysis (CFA) (35), Conservative-Minus-Aggressive (19), Constant Elasticity of Variance Model (109), Constant–Elasticity-of-Variance (CEV) process (51), Consumer sentiment (42), Consumption-based asset pricing model (48), Contagion (129), Continuous wavelet analysis (4), Corporate governance (32), Correlation (118), Correlation breakdown (8), Cost of Capital (37, 100), Cost-minimization (49), Covariance (81), Covariance Regression Model (113), Covered Call (83), Cox Process (34), Credit analysis (78), Credit card (101), Credit Card Delinquency (127), Credit Default Swaps (60), Credit risk (38, 101), Credit risk classification (20, 44), Credit spread (110), Credit-scoring model (57), Cross section of stock returns (121), Cross-section data (26), CRSP value-weighted index (93), Currency risk (12), and Cyclical component (26).

Data mining (21, 55), DCC-GARCH model (123), DCC-MVGARCH (129), Debt-like signal (59), Decision Table (21), Decision tree (21, 101), Decomposition of estimated regression coefficient (62), Deep Learning (119), Deep Neural Network (127), Default (101), Default barrier (110), Default Prediction (50), Default probability (78, 126), Default risk (128), Delinquency (101), Delta (∆) (86), Demand function (99, 122), Deposit insurance (15), Difference-in-differences (124), Dimension reduction (8), Direct and reverse regression (75), Direct effect (130), Disclosure and counter-signaling (17), Discounted value (49), Discriminant analysis (77, 78, 126), Discriminatory power (57), Disequilibrium effect (99), Disequilibrium estimation method (1), Disequilibrium model (99), Disposition effect (16), Disruptive technologies (56), Distributed Lag Models (91), Diversification (116), Diversification benefits (13), Dividend Policy (97, 116), Dividends (96), Dodd-Frank (131), Domestic and foreign advisors (76), Dow theory (87), Down-and-Out Barrier model (50), Downside risk (58), DTSM (Dynamic term structure models) (61), Due Process (105), Duration (88), Durbin, Wu, Hausman (DWH) Specification Tests (28), Dynamic capital budgeting decision (5), Dynamic CAPM (122), Dynamic conditional correlation (123, 129), Dynamic conditional variance decomposition (123), Dynamic Factors (63), and Dynamic hedging (89).

Early adoption (17), Earnings forecasts (30), Earnings management (32), Earnings revisions (30), Earnings Surprises (94), East Asian bond and stock markets (123), Econometric and statistical methods (47), Efficiency (131), Efficiency hypothesis (32), EGARCH model (14), Elliptical copula (73), Emerging markets (25), Empirical methods (131), Empirical performance (51), Employees (56), Endogeneity (28), Endogenous industry structure (45), Endogenous supply (100), Endogenous variables (5), Equality of tail risks (72), Equity-like signal (59), Error correction model (6), Errors-in-Variables (37, 75, 98, 116), Estimate Implied Variance (106), Estimation (116), Estimation Approach (50), Estimation Stability (114), ETFs (29), Euler equations (12), European options (24, 84), Event extraction (18), Evolution strategy (44), Ex ante probability (70), ex Post Sharpe ratio (93), Exactly identified (100), Ex-ante moments (40), Excel program (84), Excel VBA (84), Excess returns (29), Exchange Option (34), Exogenous variables (5), Expected discounted penalty (41), Expected payoff (7), Explanatory power (57), Exponential smoothing (26), Exponential smoothing constant (26), Extended Kalman Filter (64), External financing (17), Extra-legal institution (3), and Extreme Bound Analysis (91).

Factor analysis (77, 78, 126), Factor attributes (119), Factor loading (10, 77, 78), Factor models (10), Factor score (77), False discovery rates (108), Fama and French factor models (121), FDIC (15), Feature extraction (20), Feltham-Ohlson model (90), Finance—Investment (69), Financial constraints (49), Financial Crisis (107), Financial Econometrics (61), Financial market integration (123), Financial mathematics (1), Financial ratios (90), Financial reform (25), Financial statement analysis (95), Financial statistics (1), Financial technology (1), Financial z-score (78, 126), Financing costs (49), Finite sample (74), Finite difference method of the SV model (51), Firm Value (66), First-difference method (124), Fixed Effects (FE) (28), Fixed-effects model (96), Flexibility hypothesis (96), Forecast timeliness (31), Forecasting Stock Prices (112), Foreign bank debt (25), Foreign bank relationships (25), Fractional integration (23), Francis and Rowell model (90), Fund performance (108), Fundamental analysis (87, 95, 112), Funding decisions (49), Funding requirements (49), Future Contract (92), Fuzzy set (21, 54), and Fuzzy regression (1).

Gamma () (86), GARCH (1,1) (123), GARCH (Generalized Autoregressive conditional heteroscedasticity) (11), GARCH method (11), GARCH model (14), GARCH-jump (70), GARJI model (70), Gaussian copula (73), Gauss-Markov conditions (115), Generalize fluctuation (1), Generalized Method of Moments (GMM) (28), Global financial market integration (118), Global investing (119), Goal programming (57), Gold (4, 92), Goodness of fit (108), GPU (39), Great Recession (29), Grouping Method (37), Growth Rate (97), GRS test (10), Gumbel copula (73), GV-Spread (40), GVIX Index (40), Habit formation (48), Hazard model (78, 126), Heckman’s Two-Stage Estimation (111), Hedge Fund (108, 125), Hedge Funds Performance (91), Hedge ratio (11), Hedging (86), Herding Behaviors (113), Heteroskedasticity (52), High frequency data (39), High-frequency data (29), High-frequency jumps (29), High-Minus-Low (19), High-ranked analysts (31), Holt/Winters Exponential Smoothing (112), Holt–Winters forecasting model (26), and Hyper-parameter optimization (20).

Identification (28), Identification problem (116), Idiosyncratic standard deviation (78), Idiosyncratic risk (98), Implied risk-neutral distribution (42), Implied volatility (39, 40), Implied volatility Smile/skew/surface (33), Implied volatility spread (103), Incomplete market (24), Indifference curve (80), Indirect effect (130), Industry portfolios (121), Inference (72), Information fusion (18), Initial Public Offerings (67), Instrumental Variable Method (37), Instrumental Variables (IV) (28), Insurance premium (15), Integrated process (72), Intelligent Portfolio Theory (43), Intention (71), Interconnectedness (9), Interest-rate anticipation swap (88), Intermarkert-spread swap (88), Internal Capital Market (46), Internal control weakness (21), International CAPM (122), International finance (12), International portfolio (13), International stock market linkage (36), Internet stock (130), Intertemporal (12), Intertemporal CAPM (122), Intervention (6), Inverse Fourier Transform and Poisson Process (34), Investment (10, 13, 121), Investment banks (76), Investment constraints (13), Investment decision (116), Investment Eq. (37), Investment Horizon (68), Investment horizons (4), Investor sentiment (42), IPO Issuance and Performance (67), Irregular component (26), and Itô’s lemma (27).

Japan (21), Jump (52), Jump diffusion (110), Jump risks (29), Jump spillover (29), Jump-diffusion (41), Kalman filter (53, 64), Kernel function selection (20), Kernel Smoothing (108), Key borrower (9), KMV-Merton model (78, 126), K-nearest neighbours (101), Korea (21), Kruskal–Wallis Test (105), Kurtosis (7), Lagging indicators (26), Lagrangian calculus maximization (81), Lagrangian multipliers (82), Lagrangian objective function (80), Large-sample theory (115), Leading indicators (26), Lease Accounting (105), Leverage effect (58), Linear programming (7, 24, 81), Linear utility function (80), Linear-equation system (77), Liquidity risk (10), Liquidity shocks (121), Liquidity-based CAPM (122), LISREL (35), LISREL Method (37), Logistic Equation (97), Logistic regression (126), Logit (21), Logit model (78), Logit regression (1), Log-normal distribution (85), Lognormal distribution method (102), Long call (83), Long memory (23, 58), Long Put (83), Long Straddle (83), Long Vertical (Bull) Spread (83), Loss aversion (48), Low interest rate environment (61), Lower bound (7), and LSTM (119).

Machine learning (101, 117, 119, 127), Make-to-Stock Inventory (46), Management earnings forecasts (2), Managerial implications (131), Mann–Whitney Test (105), Market beta (79), Margrabe Model (34), Market model (79, 81), Market portfolio (10), Market risk (38), Markovian Models (46), Markowitz modern portfolio theory (14), Mathematical Programming Method (37), Matlab (39), MATLAB Approach (106), Matrices (77), Maturity (88), Maximum likelihood estimation (50, 73), Maximum Likelihood Estimation (MLE) (50), Maximum likelihood estimator (65, 99), Maximum Likelihood Method (37), Maximum mean extended-gini coefficient hedge ratio (11), Mean Reverting Process (97), Mean squared error (26), Mean–variance capital asset pricing (47), Mean–variance efficiency (93), Measurement Error (28, 37, 62, 75, 98), Mental accounting (16), Mergers (116), Mergers and acquisitions (76), Merton distance model (126), MINIMAX goal programming (57), Minimum generalized semi-variance hedge ratio (11), Minimum value at risk hedge ratio (11), Minimum variance hedge ratio (11), Minimum variance unbiased estimator (65), Mixture copula (38), Mixture Kalman Filter (64), Mobile banking (71), Model of Ang and Piazzesi ( 2003 ) (61), Model of Joslin et al. ( 2013 ) (61), Model of Joslin et al. ( 2011 ) (61), Moderating effect (16), Momentum (10, 19, 121), Momentum factor (103), Momentum Strategies (94, 95), Money market liquidity premium (121), Moral hazard (15), Moving average (87), Multi variable spew-normal distribution method (11), Multi-Factor Risk model (119), Multinomial Logit Model (111), Multiperiod dynamic CAPM (99), Multiple criteria and multiple constraint level (MC2) linear programming (54), Multiple criteria linear programming data mining (21), Multiple discriminant analysis (21), Multiple factor transfer pricing model (54), Multiple-index model (81), Multivariate Discriminant Analysis (MDA) (78), Multivariate F test (10), Multivariate GARCH (129), Multivariate log-normal distribution (85), Multivariate normal distribution (85), Multi-factor and multi-indicator (MIMIC) model (1), and Mutual fund (108).

Natural Language Generation (119), Natural language processing (21), Net Charge-Off Rates (63), Neural network (101), Neural Network Model (112), NLG (119), Non parametric tests (28), Nonaudit fees (22), Noncentral Chi Square Distribution (109), Nonlinear regression (1), Noncentral t distribution (65, 69), Non-Financial Information (130), Non-normal Data (113), Non-parametric (24), Non-parametric method (120), Non-parametric regression (118), Non-systematic risk (79), Normal distribution (85), N-Period OPM (84), Numerical experiment (51), Odd-Lot theory (87), OLS (45), Omega model (104), Omitted Variables (28), One-period OPM (84), Operating profitability (121), Operational risk (38), Optimal capital structure (41), Optimal financial policy (49), Optimization (49), Optimum mean variance hedge ratio (11), Optimum mean MEG hedge ratio (11), Option (128), Option bound (7, 85), Option bounds (24), Option price (103), Option pricing (33, 109), Option pricing model (51), Options pricing (27), and Out-of-Sample Forecasts (63).

Panel Data (28), Panel vector auto-regressions (60), Parallel computing (39), Parametric method (120), Partial adjustment (100), Partial Adjustment Model (97), Partial Least Squares (63), Particle Filter (64), Partition function (8), Past stock returns (103), Path analysis (1, 130), Payout policy (96), Payout Ratio (97), PCA (Principal components analysis) (61), PCDTSM (Principal component-based DTSM) (61), Peer Benchmarking (45), Percentage of moving average (26), Performance Manipulation (91), Performance measure (62), Phase-type distribution (41), Planning horizon (49), Poisson regression (1), Policy (15), Policy analyses (124), Portfolio (69), Portfolio construction (30), Portfolio management (30), Portfolio optimization (30), Portfolio selection (104), Portfolio theory (30), Post-Earnings-Announcement Drift (94), Post-earnings-announcement drifts (53), Power index (9), Predictability (107), Price pressure (103), Principal Component Analysis (63), Principal components model (118), Probability integral transform (73), Probability limit for regression coefficient (62), Probit (21), Probit Model (111, 126), Probit regression (1), Product market competition (45), Production cost (90), Profitability (10), Prospect theory (48), Protective Put (83), Pure-yield-pickup swap (88), Put option (84), Put options (89), Put-call parity (83), Put–call parity (42), and Python (101).

Quadratic cost (100), Quality-Minus-Junk (19), Quantile (25, 72), Quantile Co-integrated (92), Quantitative analysis (18), Random Coefficient Model (114), Random coefficient method (11), Random Effects (RE) (28), Realized variation (33), Recurrent survival analysis (59), Reduced-form (100), Regime-switching GARCH method (11), Regret avoidance (16), Related Mergers (116), Relative risk aversion distribution (65), Rent-seeking hypothesis (32), Revenue Surprises (94), Rho ( \(\rho\) ) (86), Risk Assessment (127), Risk aversion (80), Risk dependence (38), Risk integration (38), Risk management (38, 129), Risk-free rate (82), Risk-mitigating effect (59), Risk-return tradeoff (58), Risk-shifting (59), RNN (119), Robo-advisor (117), Robust Hausman (28), Robust standard errors that incorporate firm-level clustering (45), and Robust-Minus-Weak (19).

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Appendix 2: Table of contents of the book entitled financial econometrics, mathematics and statistics (Springer, 2019)

Chapter 1: Introduction To Financial Econometrics, Mathematics, and Statistics

2.1 PART I: regression and financial econometrics

Chapter 2: Multiple Linear Regression

Chapter 3: Other Topics in Applied Regression Analysis

Chapter 4: Simultaneous Equation Models

Chapter 5: Econometric Approach to Financial Analysis, Planning, and Forecasting

Chapter 6: Fixed Effects versus Random Effects in Finance Research

Chapter 7: Alternative Methods to Deal with Measurement Error

Chapter 8: Three Alternative Methods in Testing Capital Asset Pricing Model

Chapter 9: Spurious Regression and Data Mining in Conditional Asset Pricing Model

2.2 PART II: Time-Series Analysis and Its Applications

Chapter 10: Time Series: Analysis, Model, and Forecasting

Chapter 11: Hedge Ratio and Time-Series Analysis

2.3 PART III: Statistical Distributions, Option Pricing Model and Risk Management

Chapter 12: The Binomial, Multinomial Distributions, and Option Pricing Model

Chapter 13: Two Alternative Binomial Option Pricing Model Approaches to Derive Black-Scholes Option Pricing Model

Chapter 14: Normal, Lognormal Distribution, and Option Pricing Model

Chapter 15: Copula, Correlated Defaults, and Credit VaR

Chapter 16: Multivariate Analysis: Discriminant Analysis and Factor Analysis

2.4 PART IV: Statistics, Ito’s calculus and option pricing model

Chapter 17: Stochastic Volatility Option Pricing Models

Chapter: 18 Alternative Methods to Estimate Implied Variance: Review and Comparison

Chapter 19: Numerical Valuation of Asian Options with Higher Moments in the Underlying Distribution

Chapter 20: Ito’s Calculus: Derivation of the Black–Scholes Option Pricing Model

Chapter 21: Alternative Methods to Derive Option Pricing Models

Chapter 22: Constant Elasticity of Variance Option Pricing Model: Integration and Detailed Derivation

Chapter 23: Option Pricing and Hedging Performance under Stochastic Volatility and Stochastic Interest Rates

Chapter 24: Nonparametric Method for European Option Bounds

Appendix 3: Table of contents of handbook of financial econometrics and statistics (Springer, 2015)

Experience, Information Asymmetry, and Rational Forecast Bias

An Overview Of Modeling Dimensions For Performance Appraisal Of Global Mutual Funds

Simulation as a Research Tool for Market Architects

The Motivations for Issuing Putable Debt: An Empirical Analysis

Multi Risk-Premia Model of US Bank Returns: An Integration of CAPM and APT

Non-Parametric Bounds for European Option Prices

Can Time-Varying Copulas Improve Mean–Variance Portfolio?

Determinations of Corporate Earnings Forecast Accuracy: Taiwan Market Experience

Market-Based Accounting Research (MBAR) Models: A Test of ARIMAX Modeling

An Assessment of Copula Functions Approach in Conjunction with Factor Model in Portfolio Credit Risk Management

Assessing Importance of Time-Series versus Cross-Sectional Changes in Panel Data: A Study of International Variations in Ex-Ante Equity Premia and Financial Architecture

Does Banking Capital Reduce Risk? An Application of Stochastic Frontier Analysis and GMM Approach

Evaluating Long-Horizon Event Study Methodology

The Effect of Unexpected Volatility Shocks on Intertemporal Risk-Return Relation

Combinatorial Methods for Constructing Credit Risk Ratings

Dynamic Interactions between Institutional Investors and the Taiwan Stock Exchange Corporation: One-regime and Threshold VAR Models

Methods of Denoising Financial Data

Analysis of Financial Time-Series using Fourier and Wavelet Methods

Composite Goodness-of-Fit Tests for Left Truncated Loss Sample

Effect of Merger on the Credit Rating and Performance of Taiwan Security Firms

On-/off-the-Run Yield Spread Puzzle: Evidence from Chinese Treasury Markets

Factor Copula for Defaultable Basket Credit Derivatives

Panel Data Analysis and Bootstrapping: Application to China Mutual Funds

Market Segmentation and Pricing of Closed-end Country Funds: An Empirical Analysis

A comparison of portfolios using different risk measurements

Using Alternative Models and a Combining Technique in Credit Rating Forecasting — An Empirical Study

Can we use the CAPM as an investment strategy? An intuitive CAPM and efficiency test.

Group Decision Making Tools for Managerial Accounting and Finance Applications

Statistics Methods Applied in Employee Stock Options

Structural Change and Monitoring Tests

Consequences of Option Pricing of a Long Memory in Volatility

Seasonal aspects of Australian electricity market

Pricing commercial timberland returns in the United States

Optimal Orthogonal Portfolios with Conditioning Information

Multi-factor, Multi-indicator approach to asset pricing: method and empirical evidence

Binomial OPM, Black–Scholes OPM and Their Relationship: Decision Tree and Microsoft Excel Approach

Dividend payments and share repurchases of U.S. firms: An econometric approach

Term Structure Modeling and Forecasting Using the Nelson-Siegel Model

The intertemporal relation between expected return and risk on currency

Quantile Regression and Value-at-Risk

Earnings Quality and Board Structure: Evidence from South East Asia

The Rationality and Heterogeneity of Survey Forecasts of the Yen-Dollar Exchange Rate: A Reexamination

Stochastic Volatility Structures and Intra-Day Asset Price Dynamics

Optimal Asset Allocation under VaR Criterion: Taiwan Stock Market

Applications of Switching Model in Finance and Accounting

Matched Sample Comparison Group Analysis

A Quasi-Maximum Likelihood Estimation Strategy for Value-at-Risk Forecasting: Application to Equity Index Futures Markets

Computer Technology for Financial Service

Long-Run Stock Return and the Statistical Inference

Value-at-Risk Estimation via a Semi-Parametric Approach: Evidence from the Stock Markets

Modeling Multiple Asset Returns by a Time-Varying t Copula Model

Internet Bubble Examination with Mean–Variance Ratio

Quantile Regression in Risk Calibration

Strike Prices of Options for Overconfident Executives

Density and Conditional Distribution Based Specification Analysis

Assessing the Performance of Estimators Dealing with Measurement Errors

Realized Distributions of Dynamic Conditional Correlation and Volatility Thresholds in the Crude Oil, Gold and Dollar/Pound Currency Markets

Pre-IT policy, Post IT policy and the Real Sphere in Turkey?

The Determination of Capital Structure: A LISREL Model Approach

Evidence on Earning Management by Integrated Oil and Gas Companies

A comparative study of two models SV with MCMC algorithm

Internal Control Material Weakness, Analysts’ Accuracy and Bias, and Brokerage Reputation

What Increases Banks’ Vulnerability to Financial Crisis: Short-Term Financing or Illiquid Assets?

Accurate Formulae for Evaluating Barrier Options with Dividends Payout and the Application in Credit Risk Valuation

Pension Funds: financial econometrics on the herding phenomenon in Spain and the United Kingdom

Estimating the Correlation of Asset Returns: A Quantile Dependence Perspective

Multi-Criteria Decision Making for Evaluating Mutual Funds Investment Strategies

Econometric Analysis of Currency Carry Trade

Evaluating the Effectiveness of Futures Hedging

Analytical bounds for Treasury bond futures prices

The Rating Dynamics of Fallen Angels and Their Speculative Grade-Rated Peers: Static versus Dynamic Approach

The roles of compensation scheme of portfolio managers, wealth and supply constraints, and the relative risk aversion of traders in the creation and control of speculative bubbles

Range Volatility: A Review of Models and Empirical Studies

Business Models: Applications to Capital Budgeting, Equity Value, and Return Attribution

VAR Models: Estimation, Inferences, and Applications

Model Selection for High-Dimensional Problems

Hedonic Regression Models

Optimal Payout Ratio under Uncertainty and the Flexibility Hypothesis: Theory and Empirical Evidence

Modeling Asset Returns with Skewness, Kurtosis, and Outliers

Alternative Models for Estimating the Cost of Equity Capital for Property/Casualty Insurers: Combined Estimator Approach

A VG-NGARCH Model for Impacts of Extreme Events on Stock Returns

Risk-Averse Portfolio Optimization via Stochastic Dominance Constraints

Implementation Problems and Solutions in Stochastic Volatility Models of the Heston Type

Stochastic Change-Point Models of Asset Returns and Their Volatilities

Unspanned Stochastic Volatilities and Interest Rate Derivatives Pricing

Alternative Equity Valuation Models

Time Series Models to Predict the Net Asset Value (NAV) of an Asset Allocation Mutual Fund VWELX

Discriminant Analysis and Factor Analysis: Theory And Method

Implied Volatility: Theory and Empirical Method

Measuring Credit Risk in a Factor Copula Model

Instantaneous Volatility Estimation by Nonparametric Fourier Transform Methods

A Dynamic CAPM with Supply Effect Theory and Empirical Results

A Generalized Model for Optimum Futures Hedge Ratio

Instrument Variable Approach to Correct for Endogeneity in Finance

Application of Poisson Mixtures in the Estimation of Probability of Informed Trading

CEO stock options and analysts’ forecast accuracy and bias

Option Pricing and Hedging Performance under Stochastic Volatility and Stochastic Interest Rates

Appendix 4: Essentials of excel, excel VBA, SAS and Minitab for statistical and financial analysis (Springer, 2016)

4.1 part a: statistical analysis.

Data Collection, Presentation, and Yahoo Finance

Histograms and the Rate of Returns of JPM and JNJ

Numerical Summary Measures on Rate of Returns of Amazon, Walmart, and the S&P 500

Probability Concepts and Their Analysis

Discrete Random Variables and Probability Distributions

The Normal and Lognormal Distributions

Sampling Distributions and Central Limit Theorem

Other Continuous Distributions

Hypothesis Testing

Analysis of Variance and Chi Square Tests

Simple Linear Regression and the Correlation Coefficient

Simple Linear Regression and Correlation: Analyses and Applications

Multiple Linear Regression

Residual and Regression Assumption Analysis

Nonparametric Statistics

Time Series: Analysis, Model, and Forecasting

Index Numbers and Stock Market Indexes

Sampling Surveys: Methods and Applications

Statistical Decision Theory

4.2 Part B: advanced applications of microsoft excel programs in financial analysis

Introduction to Excel Programming

Introduction to VBA Programming

Professional Techniques Used in Excel and Excel VBA Techniques

Binomial Option Pricing Model Decision Tree Approach

Microsoft Excel Approach to Estimating Alternative Option Pricing Models

Alternative Methods to Estimate Implied Variance

Greek Letters and Portfolio Insurance

Portfolio Analysis and Option Strategies

Simulation and Its Application

4.3 Part C: applications of simultaneous equation in finance research: methods and empirical results

Application of Simultaneous Equation in Finance Research: Methods and Empirical Results

Hedge Ratios: Theory and Applications

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Lee, C.F. Financial econometrics, mathematics, statistics, and financial technology: an overall view. Rev Quant Finan Acc 54 , 1529–1578 (2020).

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Issue Date : May 2020


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Leif Andersen Selected as the Recipient of the 2023 IAQF/Northfield Financial Engineer of the Year Award.

January 26, 2024 – NEW YORK CITY – The International Association for Quantitative Finance (IAQF) and Northfield Information Services have named Leif Andersen, the Global Co-Head of the Quantitative Strategies & Data Group (QSDG) at Bank of America, and an Adjunct Professor at NYU’s Courant Institute for Mathematical Sciences and at Carnegie Mellon University’s Department of Mathematical Services, as the 2023 IAQF/Northfield Financial Engineer of the Year (FEOY). The award will be presented to Professor Andersen at a celebration in New York City in the spring of 2024.

Read the full press release   here .

Rachel Schutt, Co-Head of BlackRock’s AI Labs, Selected as the Recipient of the  2023 IAQF Innovation Award.

February 20, 2024 – NEW YORK CITY – The International Association for Quantitative Finance  (IAQF) has named Dr. Rachel Schutt, Managing Director and Co-Head of BlackRock AI Labs, as the  winner of the 2023 IAQF Innovation Award sponsored by Berkeley SkyDeck Fund. The award will be  presented to Dr. Schutt at a celebration in New York City in on June 5  , 2024.

“I am incredibly honored to be selected for the inaugural IAQF Innovation Award. Running the AI Labs  alongside Professor Stephen Boyd has allowed us to make fundamental contributions in bridging the  worlds of academia and practice,” said Schutt. “It's an affirmation of the impact of data science in solving high-priority problems and advancing innovation. Thank you, IAQF, for this exciting  recognition.”

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Join the community, search results, finrl: a deep reinforcement learning library for automated stock trading in quantitative finance.

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Important Research Papers for Quants

A list of foundational research papers that every aspiring and practicing quant should read., why research papers.

Unlike many other disciplines within the umbrella of finance, quantitative finance tends to be very academic in nature . This means that a majority of the modern techniques and practices used within this field have arisen from innovations in research labs at universities and other academic institutions. Therefore, reading research papers that have been published by the premier quantitative finance universities is a worthwhile pursuit.

If you're just interested in finding out the most recent quant research papers that have been published you can find a great list of them on arxiv or srrn . However, if you're looking for a curated list of some of the most important quant finance research papers to start, that's what we'll cover in this article. We'll share the most seminal papers in the field, including those that introduced the French Fama model all the way to the Black Scholes model.

Paper #1 - What Happened To The Quants in August 2007?

This paper covers the remarkable events that unfolded during the week of August 6th that shook up the hedge fund industry. During this week, many quantitative hedge funds experienced unprecedented losses, which could be attributed to their use of long/short equity strategies (the use of short-selling). During this week, there was hypothesized to be a sudden liquidation of a series of quantitative portfolios which in return caused increased pressure on the long/short strategies. Further research of this event revealed that systemic risk associated with the quant industry may be increasing over recent years.

Paper #2 - The Cross-Section of Expected Stock Returns

In this paper, Fama reveals how leveraging size and book-to-market equity can capture the cross-sectional variation in average stock returns. This is demonstrated through the use of multiple linear regressions, which highlight that stock risks are multidimensional. The significance of this is that it can be leveraged by investors to understand how varying characteristics can be used to estimate a stock's expected return.

Paper #3 - A Five-Factor Asset Pricing Model

In this paper, Fama reveals a new financial model that aims to be an improvement on the three-factor model introduced in 1993. This model aims to capture size, value, quality, profitability, and investment patterns in average stock returns . The overall model not only better explains stock return but also decreases the unexplained variance of the predictions. While the model is an improvement over its predecessor, its minor flaw is that it fails to capture the low average returns on small stocks. Overall, this paper was very important because it gave future quants a framework for approaching average return modeling.

Paper #4 - The Statistics of Sharpe Ratios

The Sharpe ratio is a popular metric used to evaluate the performance of a portfolio. In essence, the Sharpe ratio compares the return on investment with its underlying risk. In this paper, Lo analyzes the statistical distribution of Sharpe ratios to see whether they are being measured accurately. In doing so, Lo finds that the annual Sharpe ratio for a hedge fund can be overstated by as much as 65 percent because of autocorrelation with monthly returns. Furthermore, adjusting the calculation of the Sharpe ratio can significantly alter the rankings of various portfolio strategies.

Paper #5 - Optimal Execution of Portfolio Transactions

This paper showcases one of the preliminary attempts at portfolio optimization . In it, Almgren and Chriss highlight the execution of portfolio transactions that aim to minimize volatility risk and transaction costs that arise from market impact. Portfolio transactions refer to transactions that move a portfolio from a given state to a new state over a defined period of time. This strategy is also commonly associated with minimizing Value at Risk (VAR) and maximizing the expected revenue of trading.

Paper #6 - The Pricing of Options and Corporate Liabilities

This paper first introduced the famous Black-Scholes model - a mathematical model for estimating the underlying price of an option based on other investment instruments and factors. The idea for this model comes from the observation that if options are being correctly priced, it should not be possible for long/short positions to be profitable. The model takes in five inputs: strike price, current stock price, time to expiration, risk-free rate, and volatility.

Paper #7 - Drift‐Independent Volatility Estimation Based on High, Low, Open, and Close Prices

This paper introduced the GARCH model - a volatility estimator that factors in periods of high, low, open, and close prices in historical time series. One of the great aspects of this model is that it allows the user to factor in more real-world context when predicting the expected return for a financial instrument. Not only has this model been demonstrated to improve the accuracy of predictions in comparison to classical estimators, but has also been shown to have the smallest variance in its predictions.

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Abstract: This paper explores articles hosted on the arXiv preprint server with the aim to uncover valuable insights hidden in this vast collection of research. Employing text mining techniques and through the application of natural language processing methods, we examine the contents of quantitative finance papers posted in arXiv from 1997 to 2022. We extract and analyze crucial information from the entire documents, including the references, to understand the topics trends over time and to find out the most cited researchers and journals on this domain. Additionally, we compare numerous algorithms to perform topic modeling, including state-of-the-art approaches.

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    The Journal of Financial and Quantitative Analysis ( JFQA) publishes theoretical and empirical research in financial economics. Topics include corporate finance, investments, capital and security markets, and quantitative methods of particular relevance to financial researchers.

  6. What are the quantitative finance papers that we should all have in our

    Which quantitative finance papers should we all know about? What are the seminal references in various quantitative finance areas such as empirical asset pricing and theoretical asset pricing? papers Share Improve this question asked Mar 20, 2018 at 14:54 community wiki phdstudent Add a comment 2 Answers Sorted by: 37

  7. Home

    Review of Quantitative Finance and Accounting deals with research involving the interaction of finance with accounting, economics and quantitative methods, focused on finance and accounting. The papers published present useful theoretical and methodological results with the support of interesting empirical applications.

  8. PDF quantitative finance papers

    Quantitative finance is a field of finance that studies mathematical and statistical models and applies them to financial markets and investments, for pricing, risk management, and portfolio allocation.

  9. Financial econometrics, mathematics, statistics, and financial

    Based upon my experience in research, teaching, writing textbooks, and editing handbooks and journals, this review paper discusses how financial econometrics, mathematics, statistics, and financial technology can be used in research and teaching for students majoring in quantitative finance. A major portion of this paper discusses essential content of Lee and Lee (Handbook of financial ...

  10. Jacobs Levy Equity Management Center

    The Jacobs Levy Equity Management Center for Quantitative Financial Research is dedicated to the advancement of quantitative finance, at the intersection of theory and practice, through the creation and dissemination of innovative knowledge.

  11. Quantitative Finance

    Quantitative Finance Published by Taylor & Francis Online ISSN: 1469-7696 · Print ISSN: 1469-7688 Journal website Author guidelines Top read articles 55 reads in the past 30 days Adaptive online...

  12. IAQF

    Financial Engineers Give a Personal View of Their Careers in Quantitative Finance. ... and more than 130 research papers. He is a co-inventor of the Conditional Value-at-Risk and the Conditional Drawdown-at-Risk optimization methodologies. He developed optimization software in risk management area, including Drawdown and Credit Risk ...

  13. Quant Research Insights

    Article A practical model for prediction of intraday volatility Although intraday volatility has been studied extensively for many asset classes, there are still important questions to be answered....

  14. Search for Quantitative Finance

    Search for Quantitative Finance | Papers With Code Search Results Subscribe FinRL: A Deep Reinforcement Learning Library for Automated Stock Trading in Quantitative Finance 6 code implementations • 19 Nov 2020

  15. Important Research Papers for Quants

    Important Research Papers for Quants A list of foundational research papers that every aspiring and practicing quant should read. O OpenQuant 2023-02-06 Why Research Papers? Unlike many other disciplines within the umbrella of finance, quantitative finance tends to be very academic in nature.

  16. Text mining arXiv: a look through quantitative finance papers

    This paper explores articles hosted on the arXiv preprint server with the aim to uncover valuable insights hidden in this vast collection of research. Employing text mining techniques and through the application of natural language processing methods, we examine the contents of quantitative finance papers posted in arXiv from 1997 to 2022. We extract and analyze crucial information from the ...

  17. The Journal of Finance

    The Journal of Finance publishes leading research across all the major fields of financial research. It is the most widely cited academic journal on finance. Each issue of the journal reaches over 8,000 academics, finance professionals, libraries, government and financial institutions around the world. Published six times a year, the journal is the official publication of The American Finance ...

  18. Quantitative Finance Aims & Scope

    Quantitative Finance welcomes original research articles that reflect the dynamism of this area. The journal provides an interdisciplinary forum for presenting both theoretical and empirical approaches and offers rapid publication of original new work with high standards of quality.

  19. Research in Quantitative Finance

    Research Papers in Quantitative Finance. Factor Risk Budgeting and Beyond, with A. R. Cetingoz, submitted Abstract: Portfolio optimization methods have evolved significantly since Markowitz introduced the mean-variance framework in 1952. While the theoretical appeal of this approach is undeniable, its practical implementation poses important ...

  20. Quantitative Finance journal metrics

    Q1 = 25% of journals with the highest CiteScores. SNIP (Source Normalized Impact per Paper): the number of citations per paper in the journal, divided by citation potential in the field. SJR (Scimago Journal Rank): Average number of (weighted) citations in one year, divided by the number of articles published in the journal in the previous ...

  21. ARF India

    This paper seeks to investigate how we invest in commodity derivatives by comparing the performance of portfolios constructed using the mean-variance model, hierarchical risk parity, and the naive strategy with the stock market and the risk-free rate. ... Nigeria. Journal of Quantitative Finance and Economics. 5(2), 243-257. https://DOI:10. ...