Dynamics of observables in rank-based models and performance of\n functionally generated portfolios

2018/02/10 by Sergio A. Almada Monter, Monter, Sergio A. Almada, Mykhaylo Shkolnikov +3 · 1 citation
Economics, Econometrics and Finance · #Complex Systems and Time Series Analysis #Financial Markets and Investment Strategies #Economic theories and models

paper · pdf · doi:10.48550/arxiv.1802.03593

Abstract

In the seminal work [9], several macroscopic market observables have been\nintroduced, in an attempt to find characteristics capturing the diversity of a\nfinancial market. Despite the crucial importance of such observables for\ninvestment decisions, a concise mathematical description of their dynamics has\nbeen missing. We fill this gap in the setting of rank-based models and expect\nour ideas to extend to other models of large financial markets as well. The\nresults are then used to study the performance of multiplicatively and\nadditively functionally generated portfolios, in particular, over short-term\nand medium-term horizons.\n

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• Stochastic portfolio theory with price impact

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