arXiv subjects

J. P. Bouchaud

Publications and source records attributed to J. P. Bouchaud.

At least 19 recordsLinked to original sources

arXiv2018

Two short pieces around the Wigner problem

We revisit the classic Wigner semi-circle from two different angles. One consists in studying the Stieltjes transform directly on the real axis, which does not converge to a fixed value but follows a Cauchy distribution that depends on the local eigenvalue density. This result was recently proven by Aizenman \& Warzel for a wide class of eigenvalue distributions. We shed new light onto their result using a Coulomb gas method. The second angle is to derive a Langevin equation for the full (matrix) resolvent, extending Dyson's Brownian motion framework. The full matrix structure of this equation allows one to recover known results on the overlaps between the eigenvectors of a fixed matrix and its noisy counterpart.

math-ph↗

arXiv2017

Black was right: Price is within a factor 2 of Value

We provide further evidence that markets trend on the medium term (months) and mean-revert on the long term (several years). Our results bolster Black's intuition that prices tend to be off roughly by a factor of 2, and take years to equilibrate. The story behind these results fits well with the existence of two types of behaviour in financial markets: "chartists", who act as trend followers, and "fundamentalists", who set in when the price is clearly out of line. Mean-reversion is a self-correcting mechanism, tempering (albeit only weakly) the exuberance of financial markets.

q-fin.PM↗

arXiv2015

Risk Premia: Asymmetric Tail Risks and Excess Returns

We present extensive evidence that ``risk premium'' is strongly correlated with tail-risk skewness but very little with volatility. We introduce a new, intuitive definition of skewness and elicit an approximately linear relation between the Sharpe ratio of various risk premium strategies (Equity, Fama-French, FX Carry, Short Vol, Bonds, Credit) and their negative skewness. We find a clear exception to this rule: trend following has both positive skewness and positive excess returns. This is also true, albeit less markedly, of the Fama-French ``Value'' factor and of the ``Low Volatility'' strategy. This suggests that some strategies are not risk premia but genuine market anomalies. Based on our results, we propose an objective criterion to assess the quality of a risk-premium portfolio.

q-fin.GN↗

arXiv2015

Deconstructing the Low-Vol Anomaly

We study several aspects of the so-called low-vol and low-beta anomalies, some already documented (such as the universality of the effect over different geographical zones), others hitherto not clearly discussed in the literature. Our most significant message is that the low-vol anomaly is the result of two independent effects. One is the striking negative correlation between past realized volatility and dividend yield. Second is the fact that ex-dividend returns themselves are weakly dependent on the volatility level, leading to better risk-adjusted returns for low-vol stocks. This effect is further amplified by compounding. We find that the low-vol strategy is not associated to short term reversals, nor does it qualify as a Risk-Premium strategy, since its overall skewness is slightly positive. For practical purposes, the strong dividend bias and the resulting correlation with other valuation metrics (such as Earnings to Price or Book to Price) does make the low-vol strategies to some extent redundant, at least for equities.

q-fin.PM↗

arXiv2014

Two centuries of trend following

We establish the existence of anomalous excess returns based on trend following strategies across four asset classes (commodities, currencies, stock indices, bonds) and over very long time scales. We use for our studies both futures time series, that exist since 1960, and spot time series that allow us to go back to 1800 on commodities and indices. The overall t-stat of the excess returns is $\approx 5$ since 1960 and $\approx 10$ since 1800, after accounting for the overall upward drift of these markets. The effect is very stable, both across time and asset classes. It makes the existence of trends one of the most statistically significant anomalies in financial markets. When analyzing the trend following signal further, we find a clear saturation effect for large signals, suggesting that fundamentalist traders do not attempt to resist "weak trends", but step in when their own signal becomes strong enough. Finally, we study the performance of trend following in the recent period. We find no sign of a statistical degradation of long trends, whereas shorter trends have significantly withered.

q-fin.PM↗

arXiv2010

Super-diffusion around the rigidity transition: Levy and the Lilliputians

By analyzing the displacement statistics of an assembly of horizontally vibrated bidisperse frictional grains in the vicinity of the jamming transition experimentally studied before, we establish that their superdiffusive motion is a genuine Levy flight, but with `jump' size very small compared to the diameter of the grains. The vibration induces a broad distribution of jumps that are random in time, but correlated in space, and that can be interpreted as micro-crack events at all scales. As the volume fraction departs from the critical jamming density, this distribution is truncated at a smaller and smaller jump size, inducing a crossover towards standard diffusive motion at long times. This interpretation contrasts with the idea of temporally persistent, spatially correlated currents and raises new issues regarding the analysis of the dynamics in terms of vibrational modes.

cond-mat.soft↗

arXiv2009

The Random First-Order Transition Theory of Glasses: a critical assessment

The aim of this paper is to summarise the basic arguments and the intuition bolstering the RFOT picture for glasses, based on a finite dimensional extension of mean-field models with an exponentially large number of metastable states. We review the pros and cons that support or undermine the theory, and the directions, both theoretical and experimental, where progress is needed to ascertain the status of RFOT. We elaborate in particular on the notions of mosaic state and point-to-set correlations, and insist on the importance of fluctuations in finite dimensions, that significantly blur the expected cross-over between a Mode-Coupling like regime and the mosaic, activated regime. We discuss in detail the fundamental predictions of RFOT, in particular the possibility to force a small enough system into an ideal glass state, and present several new ones, concerning aging properties or non-linear rheology. Finally, we compare RFOT to other recent theories, including elastic models, Frustration Limited Domains or Kinetically Constrained models.

cond-mat.dis-nn↗

arXiv2009

Financial Applications of Random Matrix Theory: a short review

We discuss the applications of Random Matrix Theory in the context of financial markets and econometric models, a topic about which a considerable number of papers have been devoted to in the last decade. This mini-review is intended to guide the reader through various theoretical results (the Marcenko-Pastur spectrum and its various generalisations, random SVD, free matrices, largest eigenvalue statistics, etc.) as well as some concrete applications to portfolio optimisation and out-of-sample risk estimation.

q-fin.ST↗

arXiv2009

Price Impact

We define what "Price Impact" means, and how it is measured and modelled in the recent literature. Although this notion seems to convey the idea of a forceful and intuitive mechanism, we discuss why things might not be that simple. Empirical studies show that while the correlation between signed order flow and price changes is strong, the impact of trades on prices is neither linear in volume nor permanent. Impact allows private information to be reflected in prices, but by the same token, random fluctuations in order flow must also contribute to the volatility of markets.

q-fin.TR↗

arXiv2007

Lower bound on the four-point dynamical susceptibility: Direct experimental test on a granular packing

We track the motion of a horizontally vibrated amorphous assembly of bidisperse hard disks, for densities ranging across the jamming transition. We derive on very general grounds a bound on the dynamical susceptibility in terms of the response of the dynamics to a change in density. This generalizes a similar bound recently derived for equilibrium liquids. We find that in our experimental system the bound is tight and reproduces the non-monotonic behavior of the dynamical susceptibility both in time and density across the jamming transition. The underlying scaling behavior reveals an intimate connection between anomalous diffusion and dynamical heterogeneity.

cond-mat.soft↗

arXiv2005

Financial Applications of Random Matrix Theory: Old Laces and New Pieces

This contribution to the proceedings of the Cracow meeting on `Applications of Random Matrix Theory' summarizes a series of studies, some old and others more recent on financial applications of Random Matrix Theory (RMT). We first review some early results in that field, with particular emphasis on the applications of correlation cleaning to portfolio optimisation, and discuss the extension of the Marcenko-Pastur (MP) distribution to a non trivial `true' underlying correlation matrix. We then present new results concerning different problems that arise in a financial context: (a) the generalisation of the MP result to the case of an empirical correlation matrix (ECM) constructed using exponential moving averages, for which we give a new elegant derivation (b) the specific dynamics of the `market' eigenvalue and its associated eigenvector, which defines an interesting Ornstein-Uhlenbeck process on the unit sphere and (c) the problem of the dependence of ECM's on the observation frequency of the returns and its interpretation in terms of lagged cross-influences.

physics.data-an↗

arXiv2005

Are defect models consistent with the entropy and specific heat of glass-formers?

We show that point-like defect model of glasses cannot explain thermodynamic properties of glass-formers, as for example the excess specific heat close to the glass transition, contrary to the claim of J.P. Garrahan, D. Chandler [Proc. Natl. Acad. Sci. 100, 9710 (2003)]. More general models and approaches in terms of extended defects are also discussed.

cond-mat.stat-mech↗

arXiv2004

A Non-Gaussian Option Pricing Model with Skew

Closed form option pricing formulae explaining skew and smile are obtained within a parsimonious non-Gaussian framework. We extend the non-Gaussian option pricing model of L. Borland (Quantitative Finance, {\bf 2}, 415-431, 2002) to include volatility-stock correlations consistent with the leverage effect. A generalized Black-Scholes partial differential equation for this model is obtained, together with closed-form approximate solutions for the fair price of a European call option. In certain limits, the standard Black-Scholes model is recovered, as is the Constant Elasticity of Variance (CEV) model of Cox and Ross. Alternative methods of solution to that model are thereby also discussed. The model parameters are partially fit from empirical observations of the distribution of the underlying. The option pricing model then predicts European call prices which fit well to empirical market data over several maturities.

cond-mat.other↗

arXiv2003

Transition and spin dynamics at very low temperature in the pyrochlores Yb2Ti2O7 and Gd2Sn2O7

The very low temperature properties of two pyrochlore compounds, Yb2Ti2O7 and Gd2Sn2O7, were investigated using an ensemble of microscopic and bulk techniques. In both compounds, a first order transition is evidenced, as well as spin dynamics persisting down to the 20mK range. The transition however has a quite different character in the two materials: whereas that in Gd2Sn2O7$ (at 1K) is a magnetic transition towards long range order, that in Yb2Ti2O7 (at 0.24K) is reminiscent of the liquid-gas transition, in the sense that it involves a 4 orders of magnitude drop of the spin fluctuation frequency; furthermore, no long range order is observed. These unusual features we attribute to frustration of the antiferromagnetic exchange interaction in the pyrochlore lattice.

cond-mat.mtrl-sci↗

arXiv2001

Multi-scale clustering in granular surface flows

We investigate steady granular surface flows in a rotating drum and demonstrate the existence of rigid clusters of grains embedded in the flowing layer. These clusters are fractal and their size is power-law distributed from the grain size scale up to the thickness of the flowing layer. The implications of the absence of a characteristic length scale on available theoretical models of dense granular flows are discussed. Finally, we suggest a possible explanation of the difference between velocity profiles observed in surface flows and in flows down a rough inclined plane.

cond-mat↗

arXiv2000

Frequency Dependence of Aging, Rejuvenation and Memory in a disordered ferroelectric

We characterize in details the aging properties of the ferroelectric phase of K Ta_{1-x} Nb_x O_3 (KTN), where both rejuvenation and (partial) memory are observed. In particular, we carefully examine the frequency dependence of several quantities that characterize aging, rejuvenation and memory. We find a marked subaging behaviour, with an a.c. dielectric susceptiblity scaling as $ω\sqrt{t_w}$, where $t_w$ is the waiting time. We suggest an interpretation in terms of pinned domain walls, much along the lines proposed for aging in a disordered ferromagnet, where both domain wall reconformations and overall (cumulative) domain growth are needed to rationalize the experimental findings.

cond-mat↗

arXiv1999

Memory interference effects in spin glasses

When a spin glass is cooled down, a memory of the cooling process is imprinted in the spin structure. This memory can be disclosed in a continuous heating measurement of the ac-susceptibility. E.g., if a continuous cooling process is intermittently halted during a certain aging time at one or two intermediate temperatures, the trace of the previous stop(s) is recovered when the sample is continuously re-heated [1]. However, heating the sample above the aging temperature, but keeping it below Tg, erases the memory of the thermal history at lower temperatures. We also show that a memory imprinted at a higher temperature can be erased by waiting a long enough time at a lower temperature. Predictions from two complementary spin glass descriptions, a hierarchical phase space model and a real space droplet picture are contested with these memory phenomena and interference effects. [1] K. Jonason, E. Vincent, J. Hammann, J. P. Bouchaud and P. Nordblad, Phys. Rev. Lett. 31, 3243 (1998).

cond-mat.dis-nn↗

arXiv1998

Memory and Chaos Effects in Spin Glasses

New low frequency ac susceptibility measurements on two different spin glasses show that cooling/heating the sample at a constant rate yields an essentially reversible (but rate dependent) X(T) curve; a downward relaxation of X occurs during a temporary stop at constant temperature (ageing). Two main features of our results are: (i)when cooling is resumed after such a stop, X goes back to the reversible curve (chaos) (ii) upon re-heating, X perfectly traces the previous ageing history (memory). We discuss implications of our results for a real space (as opposed to phase space) picture of spin glasses.

cond-mat.dis-nn↗