This paper supplements Dark (2003c) where bivariate error correction GARCH and FIGARCH models between the All Ordinaries Index and its Share Price Index (SPI) futures are used to estimate dynamic minimum variance hedge ratios (MVHRs). Dark (2003c) documents the importance of allowing for long...

Venture capitalists enjoy incentive-laden compensation schemes where they are paid a fixed amount (management fees) plus a share of profit (success fees). This scheme is of course intended to provide venture capitalists with strong incentives under the heavy information asymmetry (Sahlman, 1982,...

We examine the dynamic forecasting behavior of security analysts in response to their prior performance relative to their peers within a continuous time/multi-period framework. Our model predicts a U-shaped relationship between the boldness of an analyst's forecast, that is, the deviation of her...

Abstract Mandatory convertibles, which are equity-linked hybrid securities that automatically convert to common stock on a pre-specified date, have become an increasingly popular means of raising capital in recent years (about $20 billion worth issued in 2001 alone). This paper presents the...

This paper presents a rigurous framework for evaluating alternative forecasting methods for Chilean industrial production and sales. While nonlinear features appear to be important for forecasting the very short term, simple univariate linear models perform about as well for almost every...

The usual index of leading indicators has constant weights on its components and is therefore implicitly premised on the assumption that the dynamical properties of the economy remain the same over time and across phases of the business cycle. We explore the possibility that the business cycle...

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...

A common problem in out-of-sample prediction is that there are potentially many relevant predictors that individually have only weak explanatory power. We propose bootstrap aggregation of pre-test predictors (or bagging for short) as a means of constructing forecasts from multiple regression...

In this paper we incorporate the term structure of interest rates in a standard inflation forecast targeting framework. Learning about the transmission process of monetary policy is introduced by having heterogeneous agents - i.e. the central bank and private agents - who have different...

We propose a new model for the variance between multiple time series, the Regime Switching Dynamic Correlation. We decompose the covariances into correlations and standard deviations and the correlation matrix follow a regime switching model; it is constant within a regime but different across...