Cross-Sectional Analysis Through Rank-Based Dynamic Portfolios

CES Working Paper No. 2012-36

28 Pages Posted: 4 Jun 2012

See all articles by Monica Billio

Monica Billio

Ca Foscari University of Venice - Dipartimento di Economia

Ludovic Calès

European Union - European Commission, Joint Research Centre

Dominique Guegan

Université Paris I Panthéon-Sorbonne

Date Written: June 4, 2012

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 multivariate 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.

Keywords: finance, continuous time random walk, cross-section analysis, rank-based models, momentum

JEL Classification: C31, C46, C58

Suggested Citation

Billio, Monica and Calès, Ludovic and Guegan, Dominique, Cross-Sectional Analysis Through Rank-Based Dynamic Portfolios (June 4, 2012). CES Working Paper No. 2012-36. Available at SSRN: https://ssrn.com/abstract=2075274 or http://dx.doi.org/10.2139/ssrn.2075274

Monica Billio

Ca Foscari University of Venice - Dipartimento di Economia ( email )

Cannaregio 873
Venice, 30121
Italy

HOME PAGE: http://www.unive.it/persone/billio

Ludovic Calès (Contact Author)

European Union - European Commission, Joint Research Centre ( email )

Via E. Fermi 2749
Ispra (VA), I-21027
Italy

Dominique Guegan

Université Paris I Panthéon-Sorbonne ( email )

106 avenue de lhopital
75634 Paris Cedex 13
Paris, IL
France

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