Sector identification in a set of stock return time series traded at the London Stock Exchange

We compare some methods recently used in the literature to detect the existence of a certain degree of common behavior of stock returns belonging to the same economic sector. Specifically, we discuss methods based on random matrix theory and hierarchical clustering techniques. We apply these methods to a portfolio of stocks traded at the London Stock Exchange. The investigated time series are recorded both at a daily time horizon and at a 5-minute time horizon. The correlation coefficient matrix is very different at different time horizons confirming that more structured correlation coefficient matrices are observed for long time horizons. All the considered methods are able to detect economic information and the presence of clusters characterized by the economic sector of stocks. However different methods present a different degree of sensitivity with respect to different sectors. Our comparative analysis suggests that the application of just a single method could not be able to extract all the economic information present in the correlation coefficient matrix of a stock portfolio.Comment: 28 pages, 13 figures, 3 Tables. Proceedings of the conference on "Applications of Random Matrices to Economy and other Complex Systems", Krakow (Poland), May 25-28 2005. Submitted for pubblication to Acta Phys. Po

A statistical analysis of the three-fold evolution of genomic compression through frame overlaps in prokaryotes

<p>Abstract</p> <p>Background</p> <p>Among microbial genomes, genetic information is frequently compressed, exploiting redundancies in the genetic code in order to store information in overlapping genes. We investigate the length, phase and orientation properties of overlap in 58 prokaryotic species evaluating neutral and selective mechanisms of evolution.</p> <p>Results</p> <p>Using a variety of statistical null models we find patterns of compressive coding that can not be explained purely in terms of the selective processes favoring genome minimization or translational coupling. The distribution of overlap lengths follows a fat-tailed distribution, in which a significant proportion of overlaps are in excess of 100 base pairs in length. The phase of overlap – pairing of codon positions in complementary reading frames – is strongly predicted by the translation orientation of each gene. We find that as overlapping genes become longer, they have a tendency to alternate among alternative overlap phases. Some phases seem to reflect codon pairings reducing the probability of non-synonymous substitution. We analyze the lineage-dependent features of overlapping genes by tracing a number of different continuous characters through the prokaryotic phylogeny using squared-change parsimony and observe both clade-specific and species-specific patterns.</p> <p>Conclusion</p> <p>Overlapping reading frames preserve in their structure, features relating to mutational origination of new genes, but have undergone modification for both immediate benefits and for variational buffering and amplification. Genomes come under a variety of different mutational and selectional pressures, and the structure of redundancies in overlapping genes can be used to detect these pressures. No single mechanism is able to account for all the variability observed among the set of prokaryotic overlapping genes but a three-fold analysis of evolutionary events provides a more integrative framework.</p> <p>Reviewers</p> <p>This article was reviewed by Eugene Koonin, Marten Huynem, and Han Liang.</p

Anomalous diffusion and Tsallis statistics in an optical lattice

We point out a connection between anomalous quantum transport in an optical lattice and Tsallis' generalized thermostatistics. Specifically, we show that the momentum equation for the semiclassical Wigner function that describes atomic motion in the optical potential, belongs to a class of transport equations recently studied by Borland [PLA 245, 67 (1998)]. The important property of these ordinary linear Fokker--Planck equations is that their stationary solutions are exactly given by Tsallis distributions. Dissipative optical lattices are therefore new systems in which Tsallis statistics can be experimentally studied.Comment: 4 pages, 1 figur

Statistical properties of thermodynamically predicted RNA secondary structures in viral genomes

By performing a comprehensive study on 1832 segments of 1212 complete genomes of viruses, we show that in viral genomes the hairpin structures of thermodynamically predicted RNA secondary structures are more abundant than expected under a simple random null hypothesis. The detected hairpin structures of RNA secondary structures are present both in coding and in noncoding regions for the four groups of viruses categorized as dsDNA, dsRNA, ssDNA and ssRNA. For all groups hairpin structures of RNA secondary structures are detected more frequently than expected for a random null hypothesis in noncoding rather than in coding regions. However, potential RNA secondary structures are also present in coding regions of dsDNA group. In fact we detect evolutionary conserved RNA secondary structures in conserved coding and noncoding regions of a large set of complete genomes of dsDNA herpesviruses.Comment: 9 pages, 2 figure

Stock mechanics: a general theory and method of energy conservation with applications on DJIA

A new method, based on the original theory of conservation of sum of kinetic and potential energy defined for prices is proposed and applied on Dow Jones Industrials Average (DJIA). The general trends averaged over months or years gave a roughly conserved total energy, with three different potential energies, i.e. positive definite quadratic, negative definite quadratic and linear potential energy for exponential rises (and falls), sinusoidal oscillations and parabolic trajectories, respectively. Corresponding expressions for force (impact) are also given. Keywords:Comment: 14 pages, 3 figures, scehudled for IJMPC 17/ issue

Inference of the kinetic Ising model with heterogeneous missing data

We consider the problem of inferring a causality structure from multiple binary time series by using the kinetic Ising model in datasets where a fraction of observations is missing. Inspired by recent work on mean field methods for the inference of the model with hidden spins, we develop a pseudo-expectation-maximization algorithm that is able to work even in conditions of severe data sparsity. The methodology relies on the Martin-Siggia-Rose path integral method with second-order saddle-point solution to make it possible to approximate the log-likelihood in polynomial time, giving as output an estimate of the couplings matrix and of the missing observations. We also propose a recursive version of the algorithm, where at every iteration some missing values are substituted by their maximum-likelihood estimate, showing that the method can be used together with sparsification schemes such as lasso regularization or decimation. We test the performance of the algorithm on synthetic data and find interesting properties regarding the dependency on heterogeneity of the observation frequency of spins and when some of the hypotheses that are necessary to the saddle-point approximation are violated, such as the small couplings limit and the assumption of statistical independence between couplings

A theory for long-memory in supply and demand

Recent empirical studies have demonstrated long-memory in the signs of orders to buy or sell in financial markets [2, 19]. We show how this can be caused by delays in market clearing. Under the common practice of order splitting, large orders are broken up into pieces and executed incrementally. If the size of such large orders is power law distributed, this gives rise to power law decaying autocorrelations in the signs of executed orders. More specifically, we show that if the cumulative distribution of large orders of volume v is proportional to v to the power -alpha and the size of executed orders is constant, the autocorrelation of order signs as a function of the lag tau is asymptotically proportional to tau to the power -(alpha - 1). This is a long-memory process when alpha < 2. With a few caveats, this gives a good match to the data. A version of the model also shows long-memory fluctuations in order execution rates, which may be relevant for explaining the long-memory of price diffusion rates.Comment: 12 pages, 7 figure

Operationalization and measurement of sign language

This piece will be included in a collection of commentaries that are being compiled as a Letter to the Editor

Calibration of optimal execution of financial transactions in the presence of transient market impact

Trading large volumes of a financial asset in order driven markets requires the use of algorithmic execution dividing the volume in many transactions in order to minimize costs due to market impact. A proper design of an optimal execution strategy strongly depends on a careful modeling of market impact, i.e. how the price reacts to trades. In this paper we consider a recently introduced market impact model (Bouchaud et al., 2004), which has the property of describing both the volume and the temporal dependence of price change due to trading. We show how this model can be used to describe price impact also in aggregated trade time or in real time. We then solve analytically and calibrate with real data the optimal execution problem both for risk neutral and for risk averse investors and we derive an efficient frontier of optimal execution. When we include spread costs the problem must be solved numerically and we show that the introduction of such costs regularizes the solution.Comment: 31 pages, 8 figure

Design of a high-force-density tubular motor

This paper deals with the design, construction and experimental verification of a high force density, tubular, linear, permanent magnet motor, driven from a high power density matrix converter for an aerospace application. The work also describes the implementation and experimental verification of a novel, thermal management technique for the phase windings of electrical machines. The technique introduces a higher thermal conductivity path between the centre of the slot and the cooling arrangement, thus increasing the heat flow away from the slot centre. An introduction to the design of the motor is first given, after which an introduction to the technique is presented. A study of how the implementation of the technique affects motor performance is then presented. A detailed overview of the construction aspects is highlighted and finally, experimental validation is used to illustrate the comparison between the predicted results and the measured results, obtained from an instrumented, test rig