I came across a little problem while dealing with a vector in R which had one of the most simple solutions. These are, in my opinion, the most annoying problems with the most simple and commonsensical solution. Anyways, yet again Utkarsh comes to rescu... [Read more...]

During my final semester at IGIDR I did a project paper in macroeconomics involving timeseries econometrics. The concept that I focused on my study was unit root, which I have touched upon in my earlier posts. This study presents a novel... [Read more...]

Recently, I was working on my master's thesis and came across an interesting observation regarding the term structure of interest rate spread volatility that I wish to share. Let me first try and throw some light on the jargon that I have used. To begi... [Read more...]

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In my previous post I presented my findings from my finance project under the guidance of Dr Susan Thomas. The results in my paper suggested that there are macroeconomic variables, particularly the INR/USD exchange rates, that help us understand the dynamics of stock returns. Although the results that I ... [Read more...]

PrologueAfter 3 semesters of studying economics at IGIDR, the basics of macroeconomics still elude me. What policy shifts what curve? What determines the slope of IS-LM and AD-AS curves? What exactly was Keynes contribution to Economics? How do all the... [Read more...]

I came across a nice problem at project euler that gave me sense of satisfaction that was unusual, I think that because I don't usually get the solutions right the first time as I did in this case. Anyhow, I shall try and decode the R codes that I... [Read more...]

As my finance term paper, I investigated an interesting question where I tried to identify macroeconomic variables that explain the returns on equities. Much of the debate has already taken place on this topic which has given rise to two competing theo... [Read more...]

The idea of modelling the time series of GNP, and other macroeconomic variables, data for US as a trend stationary (TS) process was brought into question by Nelson and Plosser in their groundbreaking research paper in 1982. Their re... [Read more...]

I came across an ingenious simulation by Perron during my Time-series lecture which I thought was worth sharing. The idea was to put your model to a further test of breaking trend before accepting the null of unit root. Let me try and illustrate this in simple language. A non-stationary ... [Read more...]

We were recently given a lecture (by Dr. Susan Thomas) on Harry Markowitz portfolio optimization theory, and I was really fascinating with the noble laureate's story of how he found it difficult to convince his guide about the importance of h... [Read more...]

In my previous post, I employed a rather crude and non-parametric approach to see if I could predict the direction of stock returns using the function runs.test(). Lets go a step further and try modelling this with a parametric econometric approach. The company that I choose for the study ... [Read more...]

My previous post talked about how we can employ PCA on the data for multiple stock returns to reduce the number of variables in explaining the variance of the underlying data. But the idea was greeted with skepticism by many. A caveat to the applicatio... [Read more...]

Financial market is interesting place, you find people taking positions (buying/selling) based on their expectations of what the security prices would be and are rewarded/penalized according to the accuracy of their expectations. The beauty of financia... [Read more...]

While working for my Financial economics project I came across this elegant tool called Principal component analysis (PCA)which is an extremely powerful tool when it comes to reducing the dimentionality of a data set comprising of highly correlated var... [Read more...]

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