2018/12/09 by Abdelali Gabih, Gabih, Abdelali, Hakam Kondakji +3 · 1 citation
Economics, Econometrics and Finance · #60G35 (Secondary) #93E11 (Primary) 60F17 #Complex Systems and Time Series Analysis #FOS: Economics and business #Financial Markets and Investment Strategies #Mathematical Finance (q-fin.MF) #Portfolio Management (q-fin.PM) #Stochastic processes and financial applications
paper · pdf · doi:10.48550/arxiv.1812.03453
openalex publication_date 2018/12/09 · openalex created_date 2022/08/01 · openalex updated_date 2026/07/28
This paper investigates a financial market where stock returns depend on a\nhidden Gaussian mean reverting drift process. Information on the drift is\nobtained from returns and expert opinions in the form of noisy signals about\nthe current state of the drift arriving at the jump times of a homogeneous\nPoisson process. Drift estimates are based on Kalman filter techniques and\ndescribed by the conditional mean and covariance matrix of the drift given the\nobservations. We study the filter asymptotics for increasing arrival intensity\nof expert opinions and prove that the conditional mean is a consistent drift\nestimator, it converges in the mean-square sense to the hidden drift. Thus, in\nthe limit as the arrival intensity goes to infinity investors have full\ninformation about the drift.\n