|
on Financial Markets |
| By: | Kuok Sin Un; Marcel Ausloos |
| Abstract: | Through a novel approach, this paper shows that substantial change in stock market behavior has a statistically and economically significant impact on equity risk premium predictability both on in-sample and out-of-sample cases. In line with Auer's ''Bullish ratio'', a ''Bullish index'' is introduced to measure the changes in stock market behavior, which we describe through a ''fluctuation detrending moving average analysis'' (FDMAA) for returns. We consider 28 indicators. We find that a ''positive shock'' of the Bullish Index is closely related to strong equity risk premium predictability for forecasts based on macroeconomic variables for up to six months. In contrast, a ''negative shock'' is associated with strong equity risk premium predictability with adequate forecasts for up to nine months when based on technical indicators. |
| Date: | 2025–08 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2509.10483 |
| By: | Hao Wang; Jingshu Peng; Yanyan Shen; Xujia Li; Lei Chen |
| Abstract: | Stock recommendation is critical in Fintech applications, which use price series and alternative information to estimate future stock performance. Although deep learning models are prevalent in stock recommendation systems, traditional time-series forecasting training often fails to capture stock trends and rankings simultaneously, which are essential consideration factors for investors. To tackle this issue, we introduce a Multi-Task Learning (MTL) framework for stock recommendation, \textbf{M}omentum-\textbf{i}ntegrated \textbf{M}ulti-task \textbf{Stoc}k \textbf{R}ecommendation with Converge-based Optimization (\textbf{MiM-StocR}). To improve the model's ability to capture short-term trends, we novelly invoke a momentum line indicator in model training. To prioritize top-performing stocks and optimize investment allocation, we propose a list-wise ranking loss function called Adaptive-k ApproxNDCG. Moreover, due to the volatility and uncertainty of the stock market, existing MTL frameworks face overfitting issues when applied to stock time series. To mitigate this issue, we introduce the Converge-based Quad-Balancing (CQB) method. We conducted extensive experiments on three stock benchmarks: SEE50, CSI 100, and CSI 300. MiM-StocR outperforms state-of-the-art MTL baselines across both ranking and profitable evaluations. |
| Date: | 2025–08 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2509.10461 |
| By: | Fagereng, Andreas; Gomez, Matthieu; Gouin-Bonenfant, Emilien; Holm, Martin; Moll, Benjamin; Natvik, Gisle |
| Abstract: | Asset valuations across many asset classes have increased substantially over the last several decades. While these rising valuations had important effects on the distribution of wealth, little is known regarding their redistributive effects in terms of welfare. To make progress on this question, we develop a sufficient statistic for the money-metric welfare gain of deviations in asset valuations. This welfare gain depends on the present value of an individual’s net asset sales rather than asset holdings: higher asset valuations benefit prospective sellers and harm prospective buyers. We estimate this quantity using panel microdata covering the universe of financial transactions in Norway from 1994 to 2019. We further demonstrate how to adapt our baseline statistic to account for important considerations, such as incomplete markets and collateral constraints. We find that the rise in asset valuations had large redistributive effects: it redistributed from the young to the old and from the poor to the wealthy. |
| JEL: | J1 |
| Date: | 2025–09–19 |
| URL: | https://d.repec.org/n?u=RePEc:ehl:lserod:129496 |
| By: | Tommaso Gasparini |
| Abstract: | Uncertainty shocks, by propagating through the banking sector, play a crucial role in driving business cycle fluctuations. To examine how the recent decline in U.S. banking competition has affected the transmission of these shocks, I develop a dynamic stochastic general equilibrium model featuring heterogeneous banks, imperfect banking competition and financial frictions. The model shows that reduced competition in the banking sector leads to higher borrowing rates and increased risk-taking by borrowers. As a result, uncertainty shocks generate more pronounced increases in defaults and sharper contractions in investment and output in less competitive banking environments. Quantitatively, the model implies that the recent decline in U.S. banking competition results in a 0.1 percentage points larger drop in GDP one year after an uncertainty shock. This finding is supported by panel local projection evidence indicating that lower banking competition amplifies the negative impact of uncertainty on GDP. |
| Keywords: | Financial Frictions, Financial Intermediaries, Heterogeneous Agents, Market Power, Uncertainty |
| JEL: | E32 E44 G21 L13 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:bfr:banfra:997 |
| By: | Shawn Kimble; Matthew P. Seay |
| Abstract: | Did bank equity prices reflect growing sector imbalances before the 2023 failure of Silicon Valley Bank? We find that banks with higher reliance on uninsured deposits, or with higher marked-to-market leverage, had lower equity returns prior to SVB's collapse. Although markets priced uninsured deposits and high leverage individually, their interaction was not reflected in market prices prior to SVB’s failure. Post-SVB, banks with less ability to meet outflows without severely depleting capital, and banks with too little useable liquidity relative to runnable funding, experienced larger stock price declines, beyond what other fundamentals and business model risks explain. In addition, we highlight evidence of feedback between equity prices and balance sheet management: banks with lower returns in 2023:Q1 were more likely to rely heavily on reciprocal deposits by 2023:Q2. |
| Keywords: | Financial Institutions; Bank Capital; Interest Rate Risk; Liquidity |
| JEL: | G20 G21 G28 |
| Date: | 2025–09–05 |
| URL: | https://d.repec.org/n?u=RePEc:fip:fedgfe:2025-78 |
| By: | Yufei Sun (Faculty of Economic Sciences, University of Warsaw) |
| Abstract: | This study evaluates the performance of pairs trading strategies in the Chinese stock market across extreme market environments, including the Financial Crisis, Bull and Bear phases, and the COVID-19 period. Using a comprehensive stock dataset and incorporating transaction costs, we find that most portfolios deliver near-zero excess returns after costs. However, in volatile conditions—especially during the Financial Crisis—top-performing portfolios achieved monthly returns up to 156 basis points. The strategy underperforms in stable or bullish markets with fewer mean-reversion opportunities. COVID-19 introduced challenges that further reduced profitability. Results highlight the critical role of transaction costs and the importance of advanced pair selection methods, such as combining the Sum of Squared Deviations (SSD), Hurst exponent, and the Number of Zero Crossings (NZC), which consistently outperform traditional approaches. While generally unprofitable, pairs trading can succeed under specific market regimes, offering insights into risk management and strategy adaptation. |
| Keywords: | Pairs Trading, Statistical Arbitrage, Sum of Squared Deviations, Hurst Exponent, Chinese Stock Market |
| JEL: | C58 C63 G11 G14 G17 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:war:wpaper:2025-23 |