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We study an investor's optimal consumption and portfolio choice problem when he is confronted with two possibly misspecified submodels of stock returns: one with IID returns and the other with predictability. We adopt a generalized recursive ambiguity model to accommodate the investor's aversion...
Persistent link: https://www.econbiz.de/10010945608
Control</li> <li>Robust Permanent Income and Pricing</li> <li>A Quartet of Semigroups for Model Specification, Robustness … Misspecification</li> <li>Doubts or Variability?</li> <li>Robust Estimation and Control without Commitment</li> <li>Fragile Beliefs and …
Persistent link: https://www.econbiz.de/10011010980
Persistent link: https://www.econbiz.de/10014564608
We explore methods for confronting model misspecification in macroeconomics. We construct dynamic equilibria in which private agents and policy makers recognize that models are approximations. We explore two generalizations of reational expectations equilibria. In one of these equilibria,...
Persistent link: https://www.econbiz.de/10005027370
robustness to asymptotic size distortion under local model misspecification, with both tests having asymptotic size equal to … nominal size under correct model specification. Robustness of the asymptotic size to model misspecification is therefore an …
Persistent link: https://www.econbiz.de/10010597196
This paper studies alternative ways of representing uncertainty about a law of motion in a version of a classic macroeconomic targetting problem of Milton Friedman (1953). We study both “unstructured uncertainty” – ignorance of the conditional distribution of the target next period as a...
Persistent link: https://www.econbiz.de/10011208559
It is widely believed that robustness (of inferences, measurements, models, phenomena and relationships discovered in … empirical investigation etc.) is a Good Thing. However, there are many different notions of robustness. These often differ both … is being deployed. This paper surveys several different notions of robustness and tries to identify why (and in what …
Persistent link: https://www.econbiz.de/10005462958
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