This is a summary of links featured on Quantocracy on Sunday, 01/23/2022. To see our most recent links, visit the Quant Mashup. Read on readers!
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Option Implied Stock Price vs. Actual Traded Stock Price [Newmark Risk]Stock and options markets can disagree about a stocks value because of informed trading in options and/or price pressure in the stock. This difference between the options implied stock price and the actual traded stock price (DOTS) can give insight into the markets view on the expected future price and thus can be utilized to predict the underlying stock return. First Glance As with many
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VIX-Yield Curve Cycles May Predict Recessions [Quantpedia]Equities provide significant long-term returns, but the growth certainly is not constant or even stable. Anyway, this holds for almost every financial asset. Bear markets alternate bull markets, and expansion periods rotate with recession periods. Since recessions and bear markets come hand in hand for several asset classes, recession predictions have always been the foremost concern. The yield
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How to estimate factor exposure, risk premia, and discount factors [SR SV]The basic idea behind factor models is that a large range of assets returns can be explained by exposure to a small range of factors. Returns reflect factor risk premia and price responses to unexpected changes in the factors. The theoretical basis is arbitrage pricing theory, which suggests that securities are susceptible to multiple systemic risks. The statistical toolkit to estimate factor