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Style analysis with particle filtering and generalized simulated annealing

Author

Listed:
  • Takaya Fukui

    (Graduate School of Economics, The University of Tokyo, Tokyo 113-8654, Japan)

  • Seisho Sato

    (Graduate School of Economics, The University of Tokyo, Tokyo 113-8654, Japan)

  • Akihiko Takahashi

    (Graduate School of Economics, The University of Tokyo, Tokyo 113-8654, Japan)

Abstract

This paper proposes a new approach to style analysis of mutual funds in a general state space framework with particle filtering and generalized simulated annealing (GSA). Specifically, we regard the exposure of each style index as a latent state variable in a state space model and employ a Monte Carlo filter as a particle filtering method, where GSA is effectively applied to estimating unknown parameters.An empirical analysis using data of three Japanese equity mutual funds with six standard style indexes confirms the validity of our method. Moreover, we create fund-specific style indexes to further improve estimation in the analysis.

Suggested Citation

  • Takaya Fukui & Seisho Sato & Akihiko Takahashi, 2017. "Style analysis with particle filtering and generalized simulated annealing," International Journal of Financial Engineering (IJFE), World Scientific Publishing Co. Pte. Ltd., vol. 4(02n03), pages 1-29, June.
    • Handle: RePEc:wsi:ijfexx:v:04:y:2017:i:02n03:n:s2424786317500372
    DOI: 10.1142/S2424786317500372
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    References listed on IDEAS

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    1. Laurens Swinkels & Pieter Van Der Sluis, 2006. "Return-based style analysis with time-varying exposures," The European Journal of Finance, Taylor & Francis Journals, vol. 12(6-7), pages 529-552.
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    4. Brown, Stephen J. & Goetzmann, William N., 1997. "Mutual fund styles," Journal of Financial Economics, Elsevier, vol. 43(3), pages 373-399, March.
    5. Takao Kobayashi & Seisho Sato & Akihiko Takahashi, 2005. "Style Analysis Based on a General State Space Model and Monte Carlo Filter (Revised in May 2007)," CARF F-Series CARF-F-032, Center for Advanced Research in Finance, Faculty of Economics, The University of Tokyo.
    6. Grinblatt, Mark & Titman, Sheridan & Wermers, Russ, 1995. "Momentum Investment Strategies, Portfolio Performance, and Herding: A Study of Mutual Fund Behavior," American Economic Review, American Economic Association, vol. 85(5), pages 1088-1105, December.
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    9. Pattarin, Francesco & Paterlini, Sandra & Minerva, Tommaso, 2004. "Clustering financial time series: an application to mutual funds style analysis," Computational Statistics & Data Analysis, Elsevier, vol. 47(2), pages 353-372, September.
    10. Takao Kobayashi & Seisho Sato & Akihiko Takahashi, 2005. "Style Analysis Based on a General State Space Model and Monte Carlo Filter," CIRJE F-Series CIRJE-F-337, CIRJE, Faculty of Economics, University of Tokyo.
    11. Akihiko Takahashi & Seisho Sato, 2001. "A Monte Carlo Filtering Approach for Estimating the Term Structure of Interest Rates," Annals of the Institute of Statistical Mathematics, Springer;The Institute of Statistical Mathematics, vol. 53(1), pages 50-62, March.
    12. Tsallis, Constantino & Stariolo, Daniel A., 1996. "Generalized simulated annealing," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 233(1), pages 395-406.
    13. Fung, William & Hsieh, David A, 1997. "Empirical Characteristics of Dynamic Trading Strategies: The Case of Hedge Funds," The Review of Financial Studies, Society for Financial Studies, vol. 10(2), pages 275-302.
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    Citations

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    Cited by:

    1. Kiyohiko G. Nishimura & Seisho Sato & Akihiko Takahashi, 2018. "Term Structure Models During the Global Financial Crisis: A Parsimonious Text Mining Approach," Working Papers on Central Bank Communication 003, University of Tokyo, Graduate School of Economics.
    2. Kiyohiko G. Nishimura & Seisho Sato & Akihiko Takahashi, 2019. "Term Structure Models During the Global Financial Crisis: A Parsimonious Text Mining Approach," Asia-Pacific Financial Markets, Springer;Japanese Association of Financial Economics and Engineering, vol. 26(3), pages 297-337, September.
    3. Jaydip Sen & Rajdeep Sen & Abhishek Dutta, 2021. "Machine Learning in Finance-Emerging Trends and Challenges," Papers 2110.11999, arXiv.org.
    4. Souta Nakatani & Kiyohiko G. Nishimura & Taiga Saito & Akihiko Takahashi, 2019. "Online Appendix for Interest Rate Model with Investor Attitude and Text Mining," CARF F-Series CARF-F-470, Center for Advanced Research in Finance, Faculty of Economics, The University of Tokyo.
    5. Souta Nakatani & Kiyohiko G. Nishimura & Taiga Saito & Akihiko Takahashi, 2020. "Interest Rate Model with Investor Attitude and Text Mining (Published in IEEE Access)," CARF F-Series CARF-F-479, Center for Advanced Research in Finance, Faculty of Economics, The University of Tokyo.
    6. Souta Nakatani & Kiyohiko G. Nishimura & Taiga Saito & Akihiko Takahashi, 2019. "Online Appendix for Interest Rate Model with Investor Attitude and Text Mining," CIRJE F-Series CIRJE-F-1136, CIRJE, Faculty of Economics, University of Tokyo.
    7. Souta Nakatani & Kiyohiko G. Nishimura & Taiga Saito & Akihiko Takahashi, 2020. "Interest Rate Model with Investor Attitude and Text Mining," CIRJE F-Series CIRJE-F-1152, CIRJE, Faculty of Economics, University of Tokyo.
    8. Masafumi Nakano & Akihiko Takahashi & Soichiro Takahashi & Takami Tokioka, 2018. "On the Effect of Bank of Japan’s Outright Purchase on the JGB Yield Curve," Asia-Pacific Financial Markets, Springer;Japanese Association of Financial Economics and Engineering, vol. 25(1), pages 47-70, March.
    9. Kiyohiko G. Nishimura & Seisho Sato & Akihiko Takahashi, 2018. "Term Structure Models During the Global Financial Crisis: A Parsimonious Text Mining Approach(Forthcoming in "Asia-Pacific Financial Markets". )," CARF F-Series CARF-F-446, Center for Advanced Research in Finance, Faculty of Economics, The University of Tokyo.
    10. Kiyohiko G. Nishimura & Seisho Sato & Akihiko Takahashi, 2018. "Term Structure Models During the Global Financial Crisis: A Parsimonious Text Mining Approach," CIRJE F-Series CIRJE-F-1101, CIRJE, Faculty of Economics, University of Tokyo.

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