arXiv subjects

Giuseppe Buccheri

Publications and source records attributed to Giuseppe Buccheri.

5 recordsLinked to original sources

arXiv2024

From rotational to scalar invariance: Enhancing identifiability in score-driven factor models

We show that, for a certain class of scaling matrices including the commonly used inverse square-root of the conditional Fisher Information, score-driven factor models are identifiable up to a multiplicative scalar constant under very mild restrictions. This result has no analogue in parameter-driven models, as it exploits the different structure of the score-driven factor dynamics. Consequently, score-driven models offer a clear advantage in terms of economic interpretability compared to parameter-driven factor models, which are identifiable only up to orthogonal transformations. Our restrictions are order-invariant and can be generalized to scoredriven factor models with dynamic loadings and nonlinear factor models. We test extensively the identification strategy using simulated and real data. The empirical analysis on financial and macroeconomic data reveals a substantial increase of log-likelihood ratios and significantly improved out-of-sample forecast performance when switching from the classical restrictions adopted in the literature to our more flexible specifications.

econ.EM↗

arXiv2023

Robust Recursive Filtering and Smoothing

Using a perturbation technique, we derive a new approximate filtering and smoothing methodology generalizing along different directions several existing approaches to robust filtering based on the score and the Hessian matrix of the observation density. The main advantages of the methodology can be summarized as follows: (i) it relaxes the critical assumption of a Gaussian prior distribution for the latent states underlying such approaches; (ii) can be applied to a general class of state-space models including univariate and multivariate location, scale and count data models; (iii) has a very simple structure based on forward-backward recursions similar to the Kalman filter and smoother; (iv) allows a straightforward computation of confidence bands around the state estimates reflecting the combination of parameter and filtering uncertainty. We show through an extensive Monte Carlo study that the mean square loss with respect to exact simulation-based methods is small in a wide range of scenarios. We finally illustrate empirically the application of the methodology to the estimation of stochastic volatility and correlations in financial time-series.

stat.ME↗

arXiv2019

A Score-Driven Conditional Correlation Model for Noisy and Asynchronous Data: an Application to High-Frequency Covariance Dynamics

The analysis of the intraday dynamics of correlations among high-frequency returns is challenging due to the presence of asynchronous trading and market microstructure noise. Both effects may lead to significant data reduction and may severely underestimate correlations if traditional methods for low-frequency data are employed. We propose to model intraday log-prices through a multivariate local-level model with score-driven covariance matrices and to treat asynchronicity as a missing value problem. The main advantages of this approach are: (i) all available data are used when filtering correlations, (ii) market microstructure noise is taken into account, (iii) estimation is performed through standard maximum likelihood methods. Our empirical analysis, performed on 1-second NYSE data, shows that opening hours are dominated by idiosyncratic risk and that a market factor progressively emerges in the second part of the day. The method can be used as a nowcasting tool for high-frequency data, allowing to study the real-time response of covariances to macro-news announcements and to build intraday portfolios with very short optimization horizons.

q-fin.TR↗

arXiv2013

Evolution of correlation structure of industrial indices of US equity markets

We investigate the dynamics of correlations present between pairs of industry indices of US stocks traded in US markets by studying correlation based networks and spectral properties of the correlation matrix. The study is performed by using 49 industry index time series computed by K. French and E. Fama during the time period from July 1969 to December 2011 that is spanning more than 40 years. We show that the correlation between industry indices presents both a fast and a slow dynamics. The slow dynamics has a time scale longer than five years showing that a different degree of diversification of the investment is possible in different periods of time. On top to this slow dynamics, we also detect a fast dynamics associated with exogenous or endogenous events. The fast time scale we use is a monthly time scale and the evaluation time period is a 3 month time period. By investigating the correlation dynamics monthly, we are able to detect two examples of fast variations in the first and second eigenvalue of the correlation matrix. The first occurs during the dot-com bubble (from March 1999 to April 2001) and the second occurs during the period of highest impact of the subprime crisis (from August 2008 to August 2009).

q-fin.ST↗

arXiv2012

Electroweak Radiative Corrections to Higgs Production via Vector Boson Fusion using SCET: Numerical Results

Electroweak radiative corrections are computed for Higgs production through vector boson fusion, qq->qqH, which is one of the most promising channels for detecting and studying the Higgs boson at the LHC. Using soft-collinear effective theory, we obtain numerical results for the resummed logarithmic contributions to the hadronic cross section at next-to-leading logarithmic order. We compare our results to HAWK and find good agreement below 2 TeV where the logarithms do not dominate. The SCET method is at its best in the high LHC energy domain where the corrections are found to be slightly larger than predicted by HAWK and by other one-loop fixed order approximations. This is one of the first tests of this formalism at the level of a hadronic cross section, and demonstrates the viability of obtaining electroweak corrections for generic processes without the need for difficult electroweak loop calculations.

hep-ph↗