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...

Developments in the global electronics industry are typically monitored by tracking indicators that span a whole spectrum of activities in the sector. However, these indicators invariably give mixed signals at each point in time, thereby hampering efforts at prediction. In this paper, we present...

In this paper, we examine whether industry-level forecasts of CPI and PPI inflation can be improved using the ``exchange rate pass-through" effect, that is, when one accounts for the variability of the exchange rate and import prices. An exchange rate depreciation leading to a higher level of...

The Stock--Watson coincident index and its subsequent extensions assume a static linear one-factor model for the component indicators. Such assumption is restrictive in practice, however, with as few as four indicators. In fact, such assumption is unnecessary if one poses the index construction...

This paper considers a factor model in which independent component analysis (ICA) is employed to construct common factors out of a large number of macroeconomic time series. The ICA has been regarded as a better method to separate unobserved sources that are statistically independent to each...

In this paper we investigate portfolio coskewness using a quadratic market model as return generating process. It is shown that portfolios of small (large) firms have negative (positive) coskewness with market. An asset pricing model including coskewness is tested through the restrictions it...

We introduce continuous-time models that capture the salient features of the short-term interest rate and remain tractable for asset pricing applications. We extend classical specifications within and outside of the affine class to multi-factor settings with latent variables that are readily...

The term structure of interest rates is often summarized using a handful of yield factors that capture shifts in the yield curve. Despite their wide application in financial economics, very little is known on the time-series properties of the yield-factor volatilities. We examine three common...

Which pricing kernel restrictions are needed to make low dimensional Markov models consistent with given sets of predictions on aggregate stock-market fluctuations ? This paper develops theoretical test conditions addressing this and related reverse engineering issues arising within a fairly...