Showing 1 - 7 of 7
Survey data on expectations frequently find evidence that forecasts are biased, rejecting the joint hypothesis of rational expectations and symmetric loss. While the literature has attempted to explain this bias through forecasters' strategic behavior, we propose a simpler explanation based on...
Persistent link: https://www.econbiz.de/10005702628
Theoretical literature in finance has shown that quantifying the risk of financial time series amounts to measuring their expected shortfall, also known as tail Value at Risk. Unfortunately, little empirical work has been devoted to the problem of modeling and inference of such risk measures...
Persistent link: https://www.econbiz.de/10005328924
In this paper, we present methods for deriving testable implication from models with multiple equilibria. Our framework includes many economic models with a one-dimensional endogenous variable---examples are macroeconomic growth models (Solow, 1956), partial equilibrium models, and games of...
Persistent link: https://www.econbiz.de/10005702626
This paper shows that the best known empirical biases of the Black and Scholes (1973) option pricing formula can be explained by investors learning the parameters of the underlying fundamental process. In the context of an equilibrium model where dividend news evolve on a binomial lattice we...
Persistent link: https://www.econbiz.de/10005328603
This paper investigates the presence of bull and bear market states in stock price dynamics. A new definition of bull and bear market states based on sequences of stopping times tracing local peaks and troughs in stock prices is proposed. Duration dependence in stock prices is investigated...
Persistent link: https://www.econbiz.de/10005328665
Evaluation of forecast optimality in economics and finance has almost exclusively been conducted under the assumption of mean squared error loss. Under this loss function optimal forecasts should be unbiased and forecast errors should be serially uncorrelated at the single period horizon with...
Persistent link: https://www.econbiz.de/10005328966
This paper studies optimal asset allocation to stocks, long-term bonds and T-bills and consumption choice in the presence of regime switching in asset returns. Optimal asset allocations vary considerably across four states - both across bonds and stocks and among large and small stocks - and...
Persistent link: https://www.econbiz.de/10005702528