Spring 2017

SEM217: Arnav Sheth, Saint Mary's College of California: Leveraging Herd Behavior in Foreign Exchange Markets

Tuesday, January 31st @ 11:00-12:30 PM (639 Evans Hall)

Leveraging Herd Behavior in Foreign Exchange Markets

Arnav Sheth, Saint Mary's College of California

We examine the relationship between equity and foreign exchange markets at, and around, the WM/Reuters benchmark exchange rate known as the the `Fix'. Execution at the Fix is a service offered by brokers (normally banks) provided they obtain the trade order until a certain time prior to 4pm GMT (11 amEastern Time). This benchmark...

SEM217: Kellie Ottoboni, UC Berkeley: "Simple Random Sampling: Not So Simple"

Tuesday, February 7th @ 11:00-12:30 PM (639 Evans Hall)

"Simple Random Sampling: Not So Simple"

Kellie Ottoboni, UC Berkeley

The theory of inference from simple random samples (SRSs) is fundamental in statistics; many statistical techniques and formulae assume that the data are an SRS. True random samples are rare; in practice, people tend to draw samples by using pseudo-random number generators (PRNGs) and algorithms that map a set of pseudo-random numbers into a subset of the...

SEM217: Markus Pelger, Stanford University: Estimating Latent Asset-Pricing Factors

Tuesday, January 24th @ 11:00-12:30 PM (639 Evans Hall)

Estimating Latent Asset-Pricing Factors

Markus Pelger, Stanford University

We develop an estimator for latent factors in a large-dimensional panel of financial data that can explain expected excess returns. Statistical factor analysis based on Principal Component Analysis (PCA) has problems identifying factors with a small variance that are important for asset pricing. Our estimator searches for factors with a high Sharpe-ratio...

SEM217: Adair Morse, Haas School of Business: A Popularity Asset Pricing Model

Tuesday, February 14th @ 11:00-12:30 PM (639 Evans Hall)

A Popularity Asset Pricing Model

Adair Morse, Haas School of Business

We study investments in impact funds, defined as venture capital or growth equity funds with dual objectives of generating financial returns and positive externalities. Being an impact fund elevates a fund’s marginal investment rate by 14.1% relative to a traditional VC fund, even more for funds focused on environmental, poverty, and minority/women issues....

SEM217: Paul Kaplan, Morningstar: A Popularity Asset Pricing Model

Tuesday, February 21st @ 11:00-12:30 PM (639 Evans Hall)

A Popularity Asset Pricing Model

Paul Kaplan, Morningstar

This paper presents a formal model for theory of popularity as laid out informally by Idzorek and Ibbotson in their seminal paper, “Dimensions of Popularity (Journal of Portfolio Management, 2014). The paper does this by extending the capital asset pricing model (CAPM) to include security characteristics that different investors regard differently. This leads to an...

SEM217: Terrence Hendershott, Haas School of Business: Relationship Trading in OTC Markets

Tuesday, February 28th @ 11:00-1:00 PM (639 Evans Hall0

Relationship Trading in OTC Markets

Terrence Hendershott, Haas School of Business

We examine the network of bilateral trading relations between insurers and dealers in the over-the-counter corporate bond market. Using comprehensive regulatory data we find that many insurers use only one dealer while the largest insurers have a network of up to eighty dealers. To understand the heterogeneity in network size we...

SEM217: Peter Shepard, MSCI: Second Order Risk

Tuesday, March 7th @ 11:00-12:30 PM (639 Evans Hall)

Second Order Risk

Peter Shepard, MSCI

Managing a portfolio to a risk model can tilt the portfolio toward weaknesses of the model. As a result, the optimized portfolio acquires downside exposure to uncertainty in the model itself, what we call “second order risk.” We propose a risk measure that accounts for this bias. Studies of real portfolios, in asset-by-asset and factor model contexts, demonstrate that second order risk...

SEM217: Carl-Fredrik Arndt, Two Sigma: Dynamics for the Top Eigenvalue and Eigenvector of Empirical Correlation Matrices of Financial Data

Tuesday, March 14th @ 11:00-12:30 PM (639 Evans Hall)

Dynamics for the Top Eigenvalue and Eigenvector of Empirical Correlation Matrices of Financial Data

Carl-Fredrik Arndt, Two Sigma

In this talk we will discuss how the top eigenvalue/eigenvector pair evolves through time for estimators of covariance and correlation matrices of equity return type data. By this we mean that the matrices have a top eigenvalue which is well separated from the others. Our main...

SEM217: Alex Papanicolaou, UC Berkeley: Minimum Conditional Expected Drawdown Portfolios

Tuesday, April 11th @ 11:00-1:00 PM (639 Evans Hall)

Minimum Conditional Expected Drawdown Portfolios

Alex Papanicolaou, UC Berkeley

Drawdown, and in particular maximum drawdown, is a widely used indicator of risk in the fund management industry. It is a vital metric for a levered investor who can get caught in a liquidity trap and forced to sell valuable positions if unable to secure funding after an abrupt market decline. Moreover, it is a pathwise risk measure in contrast to end-...

SEM217: Farzad Pourbabaee, UC Berkeley: Large Deviations of Factor Models with Regularly-Varying Tails: Asymptotics and Efficient Estimation

Tuesday, April 4th @ 11:00-12:30 PM (639 Evans Hall)

Large Deviations of Factor Models with Regularly-Varying Tails: Asymptotics and Efficient Estimation

Farzad Pourbabaee, UC Berkeley

Abstract: I analyze the large deviation probability of factor models generated from components with regularly-varying tails, a large subclass of heavy tailed distributions. An efficient sampling method for tail probability estimation of this class is introduced and shown to exponentially outperform the...