Browsing by Subject "Factor models"

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    Do actions speak louder than words? The response of asset prices to monetary policy actions and statements
    (Federal Reserve Board, 2005) Gürkaynak, R. S.; Sack, B.; Swanson, E. T.
    We investigate the effects of U.S. monetary policy on asset prices using a high-frequency event-study analysis. We test whether these effects are adequately captured by a single factor-changes in the federal funds rate target - and find that they are not. Instead, we find that two factors are required. These factors have a structural interpretation as a "current federal funds rate target" factor and a "future path of policy" factor, with the latter closely associated with Federal Open Market Committee statements. We measure the effects of these two factors on bond yields and stock prices using a new intraday data set going back to 1990. According to our estimates, both monetary policy actions and statements have important but differing effects on asset prices, with statements having a much greater impact on longer-term Treasury yields.
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    ItemOpen Access
    Statistical arbitrage: factor investing approach
    (Springer Science and Business Media Deutschland GmbH, 2023-09-16) Akyıldırım, E.; Goncu, A.; Hekimoğlu, A.; Nguyen, D. K.; Şensoy, Ahmet
    We introduce a continuous time model for stock prices in a general factor representation with the noise driven by a geometric Brownian motion process. We derive the theoretical hitting probability distribution for the long-until-barrier strategies and the conditions for statistical arbitrage. We optimize our statistical arbitrage strategies with respect to the expected discounted returns and the Sharpe ratio. Bootstrapping results show that the theoretical hitting probability distribution is a realistic representation of the empirical hitting probabilities. We test the empirical performance of the long-until-barrier strategies using US equities and demonstrate that our trading rules can generate statistical arbitrage profits. © 2023, The Author(s), under exclusive licence to Springer-Verlag GmbH Germany, part of Springer Nature.