Events

Alex Shkolnik, UC Berkeley: Identifying Financial Risk Factors with a Low-Rank Sparse Decomposition

Factor models of security returns aim to decompose an asset return covariance matrix into a systematic component and a specific risk component. Standard approaches like PCA and maximum likelihood suffer from several drawbacks including a lack of robustness as well as their strict assumptions on the underlying model of returns. We survey some modern, robust methods to uniquely decompose a return covariance matrix into a low-rank component and a sparse component. Surprisingly, the identification of the unique low rank and sparse components is feasible under mild assumptions. We apply the...

Kellie Ottoboni, UC Berkeley: Model-based matching for causal inference in observational studies

Drawing causal inferences from nonexperimental data is difficult due to the presence of confounders, variables that affect both the selection into treatment groups and the outcome. Post-hoc matching and stratification can be used to group individuals who are comparable with respect to important variables, but commonly used methods often fail to balance confounders between groups. We introduce model-based matching, a nonparametric method which groups observations that would be alike aside from the treatment. We use model-based matching to conduct stratified permutation tests of association...

Alex Papanicolaou, Integral Development Corporation: Background Subtraction for Pattern Recognition in High Frequency Financial Data

Financial markets produce massive amounts of complex data from multiple agents, and analyzing these data is important for building an understanding of markets, their formation, and the influence of different trading strategies. I introduce a signal processing approach to deal with these complexities by applying background subtraction methods to high frequency financial data so as to extract significant market making behavior. In foreign exchange, for prices in a single currency pair from many sources, I model the market as a low-rank structure with an additive sparse component representing...