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arXiv · 2401.05414

On the Three Demons in Causality in Finance: Time Resolution, Nonstationarity, and Latent Factors

Xinshuai Dong·Haoyue Dai·Yewen Fan·Songyao Jin·Sathyamoorthy Rajendran·Kun Zhang
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Abstract

Financial data is generally time series in essence and thus suffers from three fundamental issues: the mismatch in time resolution, the time-varying property of the distribution - nonstationarity, and causal factors that are important but unknown/unobserved. In this paper, we follow a causal perspective to systematically look into these three demons in finance. Specifically, we reexamine these issues in the context of causality, which gives rise to a novel and inspiring understanding of how the issues can be addressed. Following this perspective, we provide systematic solutions to these problems, which hopefully would serve as a foundation for future research in the area.

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Xinshuai Dong, Haoyue Dai, Yewen Fan, Songyao Jin, Sathyamoorthy Rajendran, Kun Zhang. 2023-12-28. On the Three Demons in Causality in Finance: Time Resolution, Nonstationarity, and Latent Factors. https://arxiv.org/abs/2401.05414

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