On Two Hypotheses in Economic Analysis of Stochastic Processes
Abstract
Purpose: Development of the apparatus of the stochastic processes econometric modeling. Discussion: The authors identify risk component in the dynamics of stochastic processesin the economy. Theoretical justification of the alternative and proportional expectations is usedto make probabilistic nature of the risk. Results: The authors suggest stochastic process decomposition based on econometric approach to allocate a probability space of risks, and to identify shocks realizations that lie beyond the boundary of this space. Proportional expectations hypothesis distinguished two types of the event influence on the stochastic process realization: continuous (risk) and discrete (shock). The authors suggest model errors and residualsas the main source of information for the identification of the probability space of risks. The technique of econometric modeling of the price and return processes on stock market under theconditions of the proposed hypotheses is considered in the empirical part of the study. F-testresults have not disproved the statement that the model residuals provide additional information about the simulated rate in the case of lack of relevant factors.
References
[2] Borisov, A.N., and Ratushnaia, E.A. 2010. Portfolio Decisions on the Basis of Risk-Prediction Estimates of Profitableness of Financial Assets. Modern Economics: Problems and Solutions, 9 (9): 135-146.
[3] Davnis, V.V., and Korotkikh, V.V. 2014. Alternative Expectations Model and its Application in Portfolio Analysis. Modern Economics: Problems and Solutions, 5 (53): 31-46.
[4] Davnis, V.V., Voishcheva, O.S., and Korotkikh, V.V. 2014. Improving Market Risk Estimation in Diagonal Model of Sharpe. Modern Economics: Problems and Solutions, 3 (51): 8-19.
[5] Ito, K. 1944. Stochastic integral. Imperial Academy. Tokyo. Proceedings, 20: 519-524.
[6] Ito, K. 1946. On a stochastic integral equation. Japan Academy. Tokyo. Proceedings, 22: 32-35.
[7] Ito, K. 1951. On stochastic differential equations. Memoirs of the American Mathematical Society, 4: 1-89.
[8] Knight, F. 1921. Risk, Uncertainty, and Profit. Boston: Houghton Miffin Co., pp: 381.
[9] Sharpe, W.F. 1963. A Simplified Model of Portfolio Choice. Management Science, 9 (2): 277-293.
[10] Shiryaev, A.N. 1999. Essentials of Stochastic Finance: Facts, Models, Theory. World Scientific Pub Co Inc., pp: 834.
The Copyright Transfer Form to ASERS Publishing (The Publisher)
This form refers to the manuscript, which an author(s) was accepted for publication and was signed by all the authors.
The undersigned Author(s) of the above-mentioned Paper here transfer any and all copyright-rights in and to The Paper to The Publisher. The Author(s) warrants that The Paper is based on their original work and that the undersigned has the power and authority to make and execute this assignment. It is the author's responsibility to obtain written permission to quote material that has been previously published in any form. The Publisher recognizes the retained rights noted below and grants to the above authors and employers for whom the work performed royalty-free permission to reuse their materials below. Authors may reuse all or portions of the above Paper in other works, excepting the publication of the paper in the same form. Authors may reproduce or authorize others to reproduce the above Paper for the Author's personal use or for internal company use, provided that the source and The Publisher copyright notice are mentioned, that the copies are not used in any way that implies The Publisher endorsement of a product or service of an employer, and that the copies are not offered for sale as such. Authors are permitted to grant third party requests for reprinting, republishing or other types of reuse. The Authors may make limited distribution of all or portions of the above Paper prior to publication if they inform The Publisher of the nature and extent of such limited distribution prior there to. Authors retain all proprietary rights in any process, procedure, or article of manufacture described in The Paper. This agreement becomes null and void if and only if the above paper is not accepted and published by The Publisher, or is with drawn by the author(s) before acceptance by the Publisher.