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Cross-Sectional Analysis through Rank-based Dynamic

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Abstract

The aim of this paper is to study the cross-sectional effects present in the market using a new framework based on graph theory. Within this framework, we represent the evolution of a dynamic portfolio, i.e. a portfolio whose weights vary over time, as a rank-based factorial model where the predictive ability of each cross-sectional factor is described by a variable. Practically, this modeling permits us to measure the marginal and joint effects of different cross-section factors on a given dynamic portfolio. Associated to a regime switching model, we are able to identify phases during which the cross-sectional effects are present in the market

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  • Monica Billio & Ludovic Calès & Dominique Guegan, 2012. "Cross-Sectional Analysis through Rank-based Dynamic," Documents de travail du Centre d'Economie de la Sorbonne 12036, Université Panthéon-Sorbonne (Paris 1), Centre d'Economie de la Sorbonne.
  • Handle: RePEc:mse:cesdoc:12036
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    References listed on IDEAS

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    1. Billio, Monica & Calès, Ludovic & Guégan, Dominique, 2011. "Portfolio symmetry and momentum," European Journal of Operational Research, Elsevier, vol. 214(3), pages 759-767, November.
    2. K. Geert Rouwenhorst, 1998. "International Momentum Strategies," Journal of Finance, American Finance Association, vol. 53(1), pages 267-284, February.
    3. Hamilton, James D, 1989. "A New Approach to the Economic Analysis of Nonstationary Time Series and the Business Cycle," Econometrica, Econometric Society, vol. 57(2), pages 357-384, March.
    4. Soosung Hwang & Alexandre Rubesam, 2015. "The disappearance of momentum," The European Journal of Finance, Taylor & Francis Journals, vol. 21(7), pages 584-607, May.
    5. Shiling Ruan & Steven MacEachern & Thomas Otter & Angela Dean, 2008. "The Dependent Poisson Race Model and Modeling Dependence in Conjoint Choice Experiments," Psychometrika, Springer;The Psychometric Society, vol. 73(2), pages 261-288, June.
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    Keywords

    Finance; Continuous Time Random Walk; cross-section analysis; rank-based models; momentum;

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