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...

This paper deals with certain estimation problems involving the covariance matrix in large dimensions. Due to the breakdown of finite-dimensional asymptotic theory when the dimension is not negligible with respect to the sample size, it is necessary to resort to an alternative framework known as...

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....

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,...

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.

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...

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...

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...

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...