Cross-Sectional Analysis through Rank-based Dynamic

Monica Billio, Ludovic Calès and Dominique Guegan
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Dominique Guegan: Centre d'Economie de la Sorbonne - Paris School of Economics, https://cv.archives-ouvertes.fr/dominique-guegan

Documents de travail du Centre d'Economie de la Sorbonne from Université Panthéon-Sorbonne (Paris 1), Centre d'Economie de la Sorbonne

Abstract: The aim of this paper is to study the cross-sectional effects present in the market using a new framework based on graph theory. Within this framework, we represent the evolution of a dynamic portfolio, i.e. a portfolio whose weights vary over time, as a rank-based factorial model where the predictive ability of each cross-sectional factor is described by a variable. Practically, this modeling permits us to measure the marginal and joint effects of different cross-section factors on a given dynamic portfolio. Associated to a regime switching model, we are able to identify phases during which the cross-sectional effects are present in the market

Keywords: Finance, Continuous Time Random Walk; cross-section analysis; rank-based models; momentum (search for similar items in EconPapers)
Pages: 28 pages
Date: 2012-05
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Persistent link: https://EconPapers.repec.org/RePEc:mse:cesdoc:12036

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