Sense, nonsense and the S&P500
Published version
Peer-reviewed
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Repository DOI
Change log
Authors
Rogers, L. C. G. https://orcid.org/0000-0003-2006-8806
Abstract
Abstract: The theory of financial markets is well developed, but before any of it can be applied there are statistical questions to be answered: Are the hypotheses of proposed models reasonably consistent with what data show? If so, how should we infer parameter values from data? How do we quantify the error in our conclusions? This paper examines these questions in the context of the two main areas of quantitative finance, portfolio selection and derivative pricing. By looking at these two contexts, we get a very clear understanding of the viability of the two main statistical paradigms, classical (frequentist) statistics and Bayesian statistics.
Description
Keywords
Article, Bayesian statistics, Frequentist statistics, Derivative pricing, Hedging, C11, C18, C58
Journal Title
Conference Name
Journal ISSN
1593-8883
1129-6569
1129-6569