A mutual information based R-vine copula strategy to estimate VaR in high frequency stock market data

Charu Sharma; Niteesh Sahni

doi:10.1371/journal.pone.0253307

Peer Review History

Original SubmissionJuly 25, 2020
15 Apr 2021 Decision Letter - Alessandro Barbiero, Editor PONE-D-20-23135 A Mutual Information Based R-Vine Copula Strategy To Estimate VaR in High Frequency Stock Market Data PLOS ONE Dear Dr. Sharma, Thank you for submitting your manuscript to PLOS ONE. After careful consideration, we feel that it has merit but does not fully meet PLOS ONE’s publication criteria as it currently stands. Therefore, we invite you to submit a revised version of the manuscript that addresses the points raised during the review process. Please submit your revised manuscript by May 30 2021 11:59PM. If you will need more time than this to complete your revisions, please reply to this message or contact the journal office at plosone@plos.org. When you're ready to submit your revision, log on to https://www.editorialmanager.com/pone/ and select the 'Submissions Needing Revision' folder to locate your manuscript file. Please include the following items when submitting your revised manuscript: A rebuttal letter that responds to each point raised by the academic editor and reviewer(s). You should upload this letter as a separate file labeled 'Response to Reviewers'. A marked-up copy of your manuscript that highlights changes made to the original version. You should upload this as a separate file labeled 'Revised Manuscript with Track Changes'. An unmarked version of your revised paper without tracked changes. You should upload this as a separate file labeled 'Manuscript'. If you would like to make changes to your financial disclosure, please include your updated statement in your cover letter. Guidelines for resubmitting your figure files are available below the reviewer comments at the end of this letter. If applicable, we recommend that you deposit your laboratory protocols in protocols.io to enhance the reproducibility of your results. Protocols.io assigns your protocol its own identifier (DOI) so that it can be cited independently in the future. For instructions see: http://journals.plos.org/plosone/s/submission-guidelines#loc-laboratory-protocols. Additionally, PLOS ONE offers an option for publishing peer-reviewed Lab Protocol articles, which describe protocols hosted on protocols.io. Read more information on sharing protocols at https://plos.org/protocols?utm_medium=editorial-email&utm_source=authorletters&utm_campaign=protocols. We look forward to receiving your revised manuscript. Kind regards, Alessandro Barbiero, Ph.D. in Statistics Academic Editor PLOS ONE Journal Requirements: When submitting your revision, we need you to address these additional requirements. Please ensure that your manuscript meets PLOS ONE's style requirements, including those for file naming. The PLOS ONE style templates can be found at https://journals.plos.org/plosone/s/file?id=wjVg/PLOSOne_formatting_sample_main_body.pdf and https://journals.plos.org/plosone/s/file?id=ba62/PLOSOne_formatting_sample_title_authors_affiliations.pdf We note that you have indicated that data from this study are available upon request. PLOS only allows data to be available upon request if there are legal or ethical restrictions on sharing data publicly. For more information on unacceptable data access restrictions, please see http://journals.plos.org/plosone/s/data-availability#loc-unacceptable-data-access-restrictions. In your revised cover letter, please address the following prompts: 2a) If there are ethical or legal restrictions on sharing a de-identified data set, please explain them in detail (e.g., data contain potentially sensitive information, data are owned by a third-party organization, etc.) and who has imposed them (e.g., an ethics committee). Please also provide contact information for a data access committee, ethics committee, or other institutional body to which data requests may be sent. 2b) If there are no restrictions, please upload the minimal anonymized data set necessary to replicate your study findings as either Supporting Information files or to a stable, public repository and provide us with the relevant URLs, DOIs, or accession numbers. For a list of acceptable repositories, please see http://journals.plos.org/plosone/s/data-availability#loc-recommended-repositories. We will update your Data Availability statement on your behalf to reflect the information you provide. 3. Please review your reference list to ensure that it is complete and correct. If you have cited papers that have been retracted, please include the rationale for doing so in the manuscript text, or remove these references and replace them with relevant current references. Any changes to the reference list should be mentioned in the rebuttal letter that accompanies your revised manuscript. If you need to cite a retracted article, indicate the article’s retracted status in the References list and also include a citation and full reference for the retraction notice. Additional Editor Comments: - I would suggest a brief description of ARMA and GARCH models and the meaning of their parameters. How did you check the fit of these models, just using AIC? - For the univariate distribution, you explained you considered both NIG and Student's t and you selected the latter due to its simplicity. What do you specifically mean? That it is easier to estimate its parameters? How is Kolmogorov-Smirnov test affected by the fact that parameters are unknown and need to be estimated? As far as I know, estimating unknown parameters may lead to a "biased" p-value. Did you explored other parametric families (eg stable distributions)? - Figures are blurred, please fix them - Perhaps when explaining the application of vines some graphs could be beneficial to a better understanding [Note: HTML markup is below. Please do not edit.] Reviewers' comments: Reviewer's Responses to Questions Comments to the Author 1. Is the manuscript technically sound, and do the data support the conclusions? The manuscript must describe a technically sound piece of scientific research with data that supports the conclusions. Experiments must have been conducted rigorously, with appropriate controls, replication, and sample sizes. The conclusions must be drawn appropriately based on the data presented. Reviewer #1: Yes ******** 2. Has the statistical analysis been performed appropriately and rigorously? Reviewer #1: Yes ****** 3. Have the authors made all data underlying the findings in their manuscript fully available? The PLOS Data policy requires authors to make all data underlying the findings described in their manuscript fully available without restriction, with rare exception (please refer to the Data Availability Statement in the manuscript PDF file). The data should be provided as part of the manuscript or its supporting information, or deposited to a public repository. For example, in addition to summary statistics, the data points behind means, medians and variance measures should be available. If there are restrictions on publicly sharing data—e.g. participant privacy or use of data from a third party—those must be specified. Reviewer #1: Yes ****** 4. Is the manuscript presented in an intelligible fashion and written in standard English? PLOS ONE does not copyedit accepted manuscripts, so the language in submitted articles must be clear, correct, and unambiguous. Any typographical or grammatical errors should be corrected at revision, so please note any specific errors here. Reviewer #1: Yes ****** 5. Review Comments to the Author Please use the space provided to explain your answers to the questions above. You may also include additional comments for the author, including concerns about dual publication, research ethics, or publication ethics. (Please upload your review as an attachment if it exceeds 20,000 characters) Reviewer #1: The paper seems quite polished. The authors clearly know this material, and then seem to have executed everything correctly. I would "Accept," but with one minor suggestion. The authors repeated refer to "mutual information," which is not a phrase with which I'm familiar. I believe they mean "dependence," in the statistical sense. Could they more clearly define (very early in the paper) what they mean by "mutual information"? ****** 6. PLOS authors have the option to publish the peer review history of their article (what does this mean?). If published, this will include your full peer review and any attached files. If you choose “no”, your identity will remain anonymous but your review may still be made public. Do you want your identity to be public for this peer review? For information about this choice, including consent withdrawal, please see our Privacy Policy. Reviewer #1: Yes:** David Zimmer [NOTE: If reviewer comments were submitted as an attachment file, they will be attached to this email and accessible via the submission site. Please log into your account, locate the manuscript record, and check for the action link "View Attachments". If this link does not appear, there are no attachment files.] While revising your submission, please upload your figure files to the Preflight Analysis and Conversion Engine (PACE) digital diagnostic tool, https://pacev2.apexcovantage.com/. PACE helps ensure that figures meet PLOS requirements. To use PACE, you must first register as a user. Registration is free. Then, login and navigate to the UPLOAD tab, where you will find detailed instructions on how to use the tool. If you encounter any issues or have any questions when using PACE, please email PLOS at figures@plos.org. Please note that Supporting Information files do not need this step. https://doi.org/10.1371/journal.pone.0253307.r001
Revision 1
1 Jun 2021 Author Response Dear Editor, Our sincere thanks to you and all the reviewers for your valuable comments on the scientific content and presentation of our manuscript titled “A Mutual Information Based R-Vine Copula Strategy To Estimate VaR in High Frequency Stock Market Data” (PONE-D-20-23135). We have made several changes to manuscript in accordance with these comments. We hope that the revised version of the manuscript will be considered favourably by PLOS ONE. We now give an item wise response to the reviewers’ comments: Regarding Journal Requirements: 1) Please ensure that your manuscript meets PLOS ONE's style requirements, including those for file naming. We crosschecked and the revised manuscript is in accord with the requirements. 2) Restriction on sharing data We have uploaded the processed data as a supporting file “S1 Table”. The raw data is “available from a third party”, details of which are provided in the cover letter as well: NSE Data & Analytics (https://www.nseindia.com/supra_global/content/dotex/about_dotex.htm). . The terms of purchase prohibit us from redistributing the Historical Data or any component of it. Revised Data Availability Statement: Raw data cannot be shared publicly because of copyright agreement with NSE Data & Analytics, formerly known DotEx International Ltd.(third party). Data are available from the NSE Data & Analytics, formerly known DotEx International Ltd., (contact via dotex_kraops@nse.co.in) for researchers who meet the criteria for access to confidential data. The terms of purchase prohibit us from redistributing the Historical Data or any component of it. However, the raw data can be purchased from NSE Data & Analytics at: https://www.nseindia.com/supra_global/content/dotex/data_products.htm We also confirm that we did not have any special access privileges that others would not have. However, we also confirm that all the processed data corresponding to each figure and each table is uploaded as a supporting file named “S1 Table”. 3) Please review your reference list to ensure that it is complete and correct. If you have cited papers that have been retracted, please include the rationale for doing so in the manuscript text, or remove these references and replace them with relevant current references. Any changes to the reference list should be mentioned in the rebuttal letter that accompanies your revised manuscript. If you need to cite a retracted article, indicate the article’s retracted status in the References list and also include a citation and full reference for the retraction notice. While adhering to the editor’s suggestion of including a brief description of ARCH and GARCH, we needed to include a fresh reference of a paper by Robert F. Engle. The list of references have been revised in view of the stated changes and we are certain that no references correspond to retracted manuscripts. Further, we have updated the missing DOIs and ISBN(in case of books) information as well. All the relevant changes have been incorporated in the revised document. Additional Editor Comments: 1) I would suggest a brief description of ARMA and GARCH models and the meaning of their parameters. How did you check the fit of these models, just using AIC? Specific details about ARCH and GARCH models have been inserted in section 3.1(lines 271-279) of the manuscript. Fitting of the three models i.e. GARCH(1,1), ARMA(1,1)-GARCH(1,1) and ARMA(1,1)-EGARCH(1,1) were based on the two steps. First step: p-values for each parameter in each model was observed to be significantly high justifying the fit of the respective models. Second step: to pick the best model out of the three we used minimum AIC criteria. 2) For the univariate distribution, you explained you considered both NIG and Student's t and you selected the latter due to its simplicity. What do you specifically mean? That it is easier to estimate its parameters? How is Kolmogorov-Smirnov test affected by the fact that parameters are unknown and need to be estimated? As far as I know, estimating unknown parameters may lead to a "biased" p-value. Did you explored other parametric families (eg stable distributions)? NIG is a subclass of generalized hyperbolic distribution depending upon 4 parameters. On the other hand, Student’s t-distribution depends only on 1 parameter. Considering errors associated with the estimation of the parameters, it is always beneficial to estimate one parameter over 4 parameters. We tried fitting of both the distributions on the univariate data and ran Kolmogrov Smirnov test to check goodness of fit. All 50 stocks cleared the test at 1% level of significance in both the cases. To keep our computational errors low we decided to pick Student’s t-distribution over NIG. Kolmogrov-Smirnov test was conducted using simulations, which ensured unbiased p-values. Since NIG and t-distribution gave us satisfying results, thus we decided to stick to them and didn’t explore further. 3) Figures are blurred, please fix them We have re-generated all figures at 600dpi and ran through the PACE software. Hope they are of acceptable quality now. 4) Perhaps when explaining the application of vines some graphs could be beneficial to a better understanding Thank you for your valuable suggestion. We have now included an example in section 3.1(refer to lines 204-213 of the manuscript) along with the associated graph (Fig 1). Reviewer #1: 1) …one minor suggestion. The authors repeated refer to "mutual information," which is not a phrase with which I'm familiar. I believe they mean "dependence," in the statistical sense. Could they more clearly define (very early in the paper) what they mean by "mutual information"? Thanks for your valuable suggestion. We have now included the definition of mutual information in the introduction section 1 (lines 69-74) and explained it in detail in section 3.2(lines 232-244). Attachments Attachment Submitted filename: Response to Reviewers.docx https://doi.org/10.1371/journal.pone.0253307.r002
3 Jun 2021 Decision Letter - Alessandro Barbiero, Editor A Mutual Information Based R-Vine Copula Strategy To Estimate VaR in High Frequency Stock Market Data PONE-D-20-23135R1 Dear Dr. Sharma, We’re pleased to inform you that your manuscript has been judged scientifically suitable for publication and will be formally accepted for publication once it meets all outstanding technical requirements. Within one week, you’ll receive an e-mail detailing the required amendments. When these have been addressed, you’ll receive a formal acceptance letter and your manuscript will be scheduled for publication. An invoice for payment will follow shortly after the formal acceptance. To ensure an efficient process, please log into Editorial Manager at http://www.editorialmanager.com/pone/, click the 'Update My Information' link at the top of the page, and double check that your user information is up-to-date. If you have any billing related questions, please contact our Author Billing department directly at authorbilling@plos.org. If your institution or institutions have a press office, please notify them about your upcoming paper to help maximize its impact. If they’ll be preparing press materials, please inform our press team as soon as possible -- no later than 48 hours after receiving the formal acceptance. Your manuscript will remain under strict press embargo until 2 pm Eastern Time on the date of publication. For more information, please contact onepress@plos.org. Kind regards, Alessandro Barbiero, Ph.D. in Statistics Academic Editor PLOS ONE Additional Editor Comments (optional): Dear authors, I would just ask you to revise the new part explaining Mutual information (rows 69-72): it is still a bit confusing with some repetitions ("random variables") Reviewers' comments: https://doi.org/10.1371/journal.pone.0253307.r003
Formally Accepted
7 Jun 2021 Acceptance Letter - Alessandro Barbiero, Editor PONE-D-20-23135R1 A Mutual Information Based R-Vine Copula Strategy To Estimate VaR in High Frequency Stock Market Data Dear Dr. Sharma: I'm pleased to inform you that your manuscript has been deemed suitable for publication in PLOS ONE. Congratulations! Your manuscript is now with our production department. If your institution or institutions have a press office, please let them know about your upcoming paper now to help maximize its impact. If they'll be preparing press materials, please inform our press team within the next 48 hours. Your manuscript will remain under strict press embargo until 2 pm Eastern Time on the date of publication. For more information please contact onepress@plos.org. If we can help with anything else, please email us at plosone@plos.org. Thank you for submitting your work to PLOS ONE and supporting open access. Kind regards, PLOS ONE Editorial Office Staff on behalf of Dr. Alessandro Barbiero Academic Editor PLOS ONE https://doi.org/10.1371/journal.pone.0253307.r004

Open letter on the publication of peer review reports

PLOS recognizes the benefits of transparency in the peer review process. Therefore, we enable the publication of all of the content of peer review and author responses alongside final, published articles. Reviewers remain anonymous, unless they choose to reveal their names.

We encourage other journals to join us in this initiative. We hope that our action inspires the community, including researchers, research funders, and research institutions, to recognize the benefits of published peer review reports for all parts of the research system.

Learn more at ASAPbio .