9 papers
Portfolios Generated by Contingent Claim Functions, with Applications to Option Pricing
Ricardo T. Fernholz, Robert Fernholz
This paper presents a synthesis of the theories of portfolio generating functions and option pricing. The theory of portfolio generation is extended to measure the value of portfol…
Permutation-Weighted Portfolios and the Efficiency of Commodity Futures Markets
Ricardo T. Fernholz, Robert Fernholz
A market portfolio is a portfolio in which each asset is held at a weight proportional to its market value. Functionally generated portfolios are portfolios for which the logarithm…
The Rank Effect
Ricardo T. Fernholz, Christoffer Koch
We decompose returns for portfolios of bottom-ranked, lower-priced assets relative to the market into rank crossovers and changes in the relative price of those bottom-ranked asset…
Asset Price Distributions and Efficient Markets
Ricardo T. Fernholz, Caleb Stroup
We explore a decomposition in which returns on a large class of portfolios relative to the market depend on a smooth non-negative drift and changes in the asset price distribution.…
Zipf's Law for Atlas Models
Ricardo T. Fernholz, Robert Fernholz
A set of data with positive values follows a Pareto distribution if the log-log plot of value versus rank is approximately a straight line. A Pareto distribution satisfies Zipf's l…
The Rank Effect for Commodities
Ricardo T. Fernholz, Christoffer Koch
We uncover a large and significant low-minus-high rank effect for commodities across two centuries. There is nothing anomalous about this anomaly, nor is it clear how it can be arb…
A Rank-Based Approach to Zipf's Law
Ricardo T. Fernholz, Robert Fernholz
An Atlas model is a rank-based system of continuous semimartingales for which the steady-state values of the processes follow a power law, or Pareto distribution. For a power law,…
Empirical Methods for Dynamic Power Law Distributions in the Social Sciences
Ricardo T. Fernholz
This paper introduces nonparametric econometric methods that characterize general power law distributions under basic stability conditions. These methods extend the literature on p…
A Statistical Model of Inequality
Ricardo T. Fernholz
This paper develops a nonparametric statistical model of wealth distribution that imposes little structure on the fluctuations of household wealth. In this setting, we use new tech…