Sergio Focardi, PhD
I'm currently a Professor of Finance at the Pole Universitaire Léonard De Vinci, Paris La Defense, France and a researcher at the De Vinci Research Center. I was previously Professor of Finance at the University of New York at Stony Brook, Long Island, and a lecturer at Princeton University. I hold a degree in Electronic Engineering from the University of Genova (Italy) and a PhD in Mathematical Finance from the University of Karlsruhe (Germany). In Genova I was a cofounder of the Interdisciplinary Research Center in Economics & Finance at the University of Genova.
My Research Interests
The underlying theme of my research activity is the study and modelling of economies and markets as complex systems formed by interacting agents with a money generation process. As a co-founder of the Interdisciplinary Research Center in Economics & Finance (CINEF) in 2000 at the University of Genoa, I contributed to the creation of multi-agent artificial markets. Our objective was to study the price formation process of artificial markets, showing that the evolution of the distribution of wealth follows inverse power laws. I later applied the techniques of percolation and random graphs to problems of risk management, proposing to use market connectivity parameters as a risk factor. I also applied models of autoregressive conditional duration to the problem of credit risk.
My applied research moved on to the study of large factor models of prices based on the intuition that, in large markets, stock prices mean revert to a unique stochastic trend. An empirical study demonstrated that the S&P 500 ensemble admits one integrated factor while all other factors are stationary. With co-researchers Frank Fabozzi and Ivan Mitov, I applied this result to constructing profitable long-short strategies. Our conclusions were published in the paper “A New Approach to Statistical Arbitrage: Strategies Based on Dynamic Factor Models of Prices and Their Performance” (Journal of Banking and Finance, April 2016).
Another problem that interested me was the problem of market valuation and, in particular, the interaction of money generation processes with market valuations. A key topic of this research is understanding if and how we can define and measure inflationary processes related to stock market valuation and, in particular, if we can identify signals of a market downturn.
More recently, my interests focus on more economic subjects applying multi-agent modelling techniques to create macroeconomic models of a complex economy with (1) heterogeneous interacting agents, (2) the banking and financial system, and (3) segregated financial flows.