En los últimos años, estamos asistiendo a un proceso de liberalización en la industria eléctrica con la finalidad de introducir competencia en dicho sector. Sin embargo una apertura del mercado no implica necesariamente una competencia efectiva y precios competitivos. Las especiales...

This paper provides new evidence concerning the probability of informed trading (PIN) and the PIN-return relationship. We take measures to overcome known estimation biases and improve the quality of quarterly PIN estimates. We use the average of a firm’s PIN estimates in four consecutive...

This paper proposes the use of a portfolio optimization methodology which combines features of equilibrium models and investor’s views as in Black and Litterman (1992), and also deals with estimation risk as in Michaud (1998). In this way, our combined methodology is able to meet the needs of...

This paper investigates the uncertainty about the trading costs associated with a given portfolio strategy. I derive accurate approximations of the ex ante probability distributions of proportional trading costs and portfolio turnover under the conventional assumption of normal asset returns....

We report evidence that boundary solutions can cause a bias in the estimate of the probability of informed trading (PIN). We develop an algorithm to overcome this bias and use it to estimate PIN for nearly 80,000 stock-quarters between 1993 and 2004. We obtain two sets of PIN estimates by using...

Many dynamic problems in economics are characterized by large state spaces which make both computing and estimating the model infeasible. We introduce a method for approximating the value function of high-dimensional dynamic models based on sieves and establish results for the: (a) consistency,...

The estimation of the inverse covariance matrix plays a crucial role in optimal portfolio choice. We propose a new estimation framework that focuses on enhancing portfolio performance. The framework applies the statistical methodology of shrinkage directly to the inverse covariance matrix using...

This chapter provides an overview of solution and estimation techniques for dynamic stochastic general equilibrium models. We cover the foundations of numerical approximation techniques as well as statistical inference and survey the latest developments in the field.

Financial analysts typically estimate volatilities and correlations from monthly or higher frequency returns when determining the optimal composition of a portfolio. Although it is widely acknowledged that these measures are not necessarily stationary across samples, most analysts assume...