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In-Sample or Out-of-Sample Tests of Predictability: Which One Should We Use?

Inoue, Atsushi; Kilian, Lutz - C.E.P.R. Discussion Papers - 2002

It is widely known that significant in-sample evidence of predictability does not guarantee significant out-of-sample predictability. This is often interpreted as an indication that in-sample evidence is likely to be spurious and should be discounted. In this Paper we question this conventional...

Persistent link: https://www.econbiz.de/10005124323

Limits to Arbitrage and Hedging: Evidence from Commodity Markets

Acharya, Viral V; Lochstoer, Lars; Ramadorai, Tarun - C.E.P.R. Discussion Papers - 2009

futures contracts. Their hedging demand is met by financial intermediaries who act as speculators, but are constrained in risk … 1980-2006, we show that producers’ hedging demand - proxied by their default risk - forecasts spot prices, futures prices …

Persistent link: https://www.econbiz.de/10005016244

Interpreting Prediction Market Prices as Probabilities

Wolfers, Justin; Zitzewitz, Eric - C.E.P.R. Discussion Papers - 2006

While most empirical analysis of prediction markets treats prices of binary options as predictions of the probability of future events, Manski (2004) has recently argued that there is little existing theory supporting this practice. We provide relevant analytic foundations, describing sufficient...

Persistent link: https://www.econbiz.de/10005136573

Macro-Hedging for Commodity Exporters

Borensztein, Eduardo; Jeanne, Olivier; Sandri, Damiano - C.E.P.R. Discussion Papers - 2009

commodity-exporting countries. We show that the introduction of hedging instruments such as futures and options enhances …

Persistent link: https://www.econbiz.de/10008577805

Are Product Spreads Useful for Forecasting? An Empirical Evaluation of the Verleger Hypothesis

Baumeister, Christiane; Kilian, Lutz; Zhou, Xiaoqing - C.E.P.R. Discussion Papers - 2013

Notwithstanding a resurgence in research on out-of-sample forecasts of the price of oil in recent years, there is one important approach to forecasting the real price of oil which has not been studied systematically to date. This approach is based on the premise that demand for crude oil derives...

Persistent link: https://www.econbiz.de/10011083532

A General Approach to Recovering Market Expectations from Futures Prices With an Application to Crude Oil

Baumeister, Christiane; Kilian, Lutz - C.E.P.R. Discussion Papers - 2014

Futures markets are a potentially valuable source of information about market expectations. Exploiting this information … has proved difficult in practice, because the presence of a timevarying risk premium often renders the futures price a … be recovered by adjusting the futures price by the estimated risk premium, a common problem in applied work is that there …

Persistent link: https://www.econbiz.de/10011083547

Prediction Markets in Theory and Practice

Wolfers, Justin; Zitzewitz, Eric - C.E.P.R. Discussion Papers - 2006

Prediction Markets, sometimes referred to as 'information markets', 'idea futures' or 'event futures', are markets …

Persistent link: https://www.econbiz.de/10005662203

Manipulation of Metals Futures: Lessons from Sumitomo

Gilbert, Christopher L - C.E.P.R. Discussion Papers - 1997

functioning and governance of London futures markets, and in particular of the LME. This paper argues that futures market … been insufficiently active in attempting to eliminate manipulations, price discovery on futures markets generates an …

Persistent link: https://www.econbiz.de/10005662332

Extracting Expectations about 1992 UK Monetary Policy from Option Prices

Söderlind, Paul - C.E.P.R. Discussion Papers - 1998

The UK pound left the ERM on 16 September 1992 after a period of turbulence. UK monetary policy soon shifted to lower short interest rates and an inflation target was announced. This paper uses daily option prices to estimate how the market’s probability distribution of the future Deutsche...

Persistent link: https://www.econbiz.de/10005791268

Information Acquisition and Portfolio Performance

Guiso, Luigi; Jappelli, Tullio - C.E.P.R. Discussion Papers - 2006

Rational investors perceive correctly the value of financial information. Investment in information is therefore rewarded with a higher Sharpe ratio. Overconfident investors overstate the quality of their own information, and thus attain a lower Sharpe ratio. We contrast the implications of the...

Persistent link: https://www.econbiz.de/10005123525