Generating Synergistic Formulaic Alpha Collections via Reinforcement Learning

In the field of quantitative trading, it is common practice to transform raw historical stock data into indicative signals for the market trend. Such signals are called alpha factors. Alphas in formula forms are more interpretable and thus favored by practitioners concerned with risk. In practice, a set of formulaic alphas is often used together for better modeling precision, so we need to find synergistic formulaic alpha sets that work well together. However, most traditional alpha generators mine alphas one by one separately, overlooking the fact that the alphas would be combined later. In this paper, we propose a new alpha-mining framework that prioritizes mining a synergistic set of alphas, i.e., it directly uses the performance of the downstream combination model to optimize the alpha generator. Our framework also leverages the strong exploratory capabilities of reinforcement learning~(RL) to better explore the vast search space of formulaic alphas. The contribution to the combination models' performance is assigned to be the return used in the RL process, driving the alpha generator to find better alphas that improve upon the current set. Experimental evaluations on real-world stock market data demonstrate both the effectiveness and the efficiency of our framework for stock trend forecasting. The investment simulation results show that our framework is able to achieve higher returns compared to previous approaches.Comment: Accepted by KDD '23, ADS trac

Is Globalization Today Really Different than Globalization a Hunderd Years Ago?

This paper pursues the comparison of economic integration today and pre 1914 for trade as well as finance, primarily for the United States but also with reference to the wider world. We establish the outlines of international integration a century ago and analyze the institutional and informational impediments that prevented the late nineteenth century world from achieving the same degree of integration as today. We conclude that the world today is different: commercial and financial integration before World War I was more limited. Given that integration today is even more pervasive than a hundred years ago, it is surprising that trade tensions and financial instability have not been worse in recent years. In the conclusion we point to the institutional innovations that have taken place in the past century as an explanation. This in turn suggests the way forward for national governments and multilaterals.

Adverse effects of Interbank funds on bank efficiency: evidence from Turkish banking sector

This paper investigates the relationship between interbank funds and efficiencies is for the commercial banks operating in Turkey between 2001-2006. Data Envelopment Analysis (DEA) is executed to find the efficiency scores of the banks for each year, and fixed effects panel data regression is carried out, with the efficiency scores being the response variable. It is observed that interbank funds (ratio) has negative effects on bank efficiency, while bank capitalization and loan ratio have positive, and profitability has insignificant effects. Our study serves as an illustrative evidence that interbank funds can have adverse effects in an emerging market

Content and Context: Identifying the Impact of Qualitative Information on Consumer Choice

Managers and researchers alike suspect that the vast amounts of qualitative information in blogs, reviews, news stories, and experts’ advice influence consumer behavior. But, does qualitative information impact or rather reflect consumer choices? We argue that because message content and consumer choice are endogenous, non-random selection and conflation of awareness and persuasion complicate causal estimation of the impact of message content on outcomes. We apply Latent Dirichlet Allocation to characterize the topics of transcribed content from 2,397 stock recommendations provided by Jim Cramer on his show Mad Money. We demonstrate that selection bias and audience prior awareness create measurable biases in estimates of the impact of content on stock prices. Comparing recommendation content to prior news, we show that he is less persuasive when he uses more novel arguments. The technique we develop can be applied in a variety of settings where marketers can present different messages depending on what subjects know

Derivative Markets' Impact on Colombian Monetary Policy

Derivatives are contingent claims that complete financial markets. Their use allow agents and firms to ameliorate the impact over con- sumption, production and investment given a change in relative prices induced by an active monetary policy. In this sense, derivatives gene- rate in some cases a loss in the effectiveness of the traditional monetary transmission channels in the short run, and in others, they promote an increase in the speed of transmission itself. Using an investment model, the impact of the use of interest rate and exchange rate derivatives in the dilution of colombian monetary channels is verified. Empirical exercises suggest that monetary policy has lost effectiveness in the short run.In spite of the surprise this result may offer given the relative im- matureness of domestic derivative markets, the marginal effect of these instruments appears to be significant, in the face of local financial mar- kets' imperfections. In addition, not only the hedge directly taken by firms with access to this instruments matter; there could be hedging spill-overs whenever commercial banks use derivatives, which allow for a more stable and cheap credit supply for firms with no access to those markets. The natural recommendation deriving from this conclusion suggests an urgent analysis of the derivatives impact over the speed of monetary transmission in Colombia.Derivatives; Monetary Policy Transmission Channels;Investment

Analysis and modeling a distributed co-operative multi agent system for scaling-up business intelligence

Modeling A Distributed Co-Operative Multi Agent System in the area of Business Intelligence is the newer topic. During the work carried out a software Integrated Intelligent Advisory Model (IIAM) has been develop, which is a personal finance portfolio ma

The timing and the probability of FDI: an application to the US multinational enterprises

An 'option-pricing' model is employed to analyse when a firm should expand its production capabilities abroad. In a framework where the firm's profits are determined by some average of the attractiveness of the home and foreign countries, and attractiveness in each country follows differentiated Brownian motions, this paper derives an optimal trigger value for FDI. The model shows that, contrary to the NPV rule, FDI entry should be optimally delayed the greater the uncertainty surrounding the future path of attractiveness in both locations. The second part of the paper is devoted to empirically test the results of the model. Drawing on data of FDI from the US into a panel of developed and developing countries and using labour costs as a proxy for (the reciprocal of) attractiveness, our estimation overwhelmingly confirms the results of the model, namely that FDI entry events are negatively related to the uncertainty surrounding attractiveness.Foreign Direct Investment, Multinational Enterprises, Option-Pricing Model; Ordered Probit Model for Panel Data.

The Timing and Probability of FDI: An Application to the United States Multinational Enterprises

An "option-pricing" model is employed to analyse when a firm should expand its production capabilities abroad. In a framework where the firm's profits are determined by some average of the attractiveness of the home and foreign countries, and attractiveness in each country follows differentiated Brownian motions, this paper derives an optimal trigger value for FDI. The model shows that, contrary to the NPV rule, FDI entry should be optimally delayed the greater the uncertainty surrounding the future path of attractiveness in both locations. Another important result is that MNEs do not regard FDI as a risk diversification tool. The second part of the paper is devoted to empirically test the results of the model. Drawing on data of FDI from the US into a panel of developed and developing countries and using labour costs as a proxy for (the reciprocal of) attractiveness, our estimation confirms the results of the model, in particular that FDI entry events are negatively related to the uncertainty surrounding attractiveness.