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The Virtue of Complexity in Return Prediction
Kelly, Bryan T.; Malamud, Semyon; Zhou, Kangying - National Bureau of Economic Research - 2022
The extant literature predicts market returns with "simple" models that use only a few parameters. Contrary to conventional wisdom, we theoretically prove that simple models severely understate return predictability compared to "complex" models in which the number of parameters exceeds the...
Persistent link: https://www.econbiz.de/10013334435
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Complexity in Factor Pricing Models
Didisheim, Antoine; Ke, Shikun; Kelly, Bryan T.; … - National Bureau of Economic Research - 2023
We theoretically characterize the behavior of machine learning asset pricing models. We prove that expected out-of-sample model performance--in terms of SDF Sharpe ratio and test asset pricing errors--is improving in model parameterization (or "complexity"). Our empirical findings verify the...
Persistent link: https://www.econbiz.de/10014372446
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APT or "AIPT"? The Surprising Dominance of Large Factor Models
Didisheim, Antoine; Ke, Shikun; Kelly, Bryan T.; … - National Bureau of Economic Research - 2024
We introduce artificial intelligence pricing theory (AIPT). In contrast with the APT's foundational assumption of a low dimensional factor structure in returns, the AIPT conjectures that returns are driven by a large number of factors. We first verify this conjecture empirically and show that...
Persistent link: https://www.econbiz.de/10015072953
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Commodity prices and markets : [NBER East Asia Seminar on Economics, volume 20 ; collection of papers that were presented at the 20th Annual East Asia Seminar on Economics (EASE) ;...
Itō, Takatoshi (contributor); Rose, Andrew (contributor) - 2011
relationship between trade and exchange rate volatility / Christian Broda and John Romalis -- Comments: Chaiyasit Anuchitworawong …
Persistent link: https://www.econbiz.de/10008909722
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Interest Rate Volatility and Contagion in Emerging Markets : Evidence from the 1990s
Edwards, Sebastian - 2000
of volatility through time. We are particularly interested in understanding whether periods of high volatility spillover … across countries. Our analysis relies both on univariate and bivariate switching volatility models. Our results indicate that … high-volatility episodes are, in general, short-lived, lasting from two to seven weeks. We find some weak evidence of …
Persistent link: https://www.econbiz.de/10012470937
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Macroeconomic Volatility in Latin America : A View and Three Case Studies
Caballero, Ricardo J. - 2000
efforts, several structural sources of volatility remain, and new ones have emerged as a result of the new and otherwise …
Persistent link: https://www.econbiz.de/10012470968
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Forecasting Crashes : Trading Volume, Past Returns and Conditional Skewness in Stock Prices
Chen, Joseph - 2000
This paper is an investigation into the determinants of asymmetries in stock returns. We develop a series of cross-sectional regression specifications which attempt to forecast skewness in the daily returns of individual stocks. Negative skewness is most pronounced in stocks that have...
Persistent link: https://www.econbiz.de/10012471074
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Have Individual Stocks Become More Volatile? An Empirical Exploration of Idiosyncratic Risk
Campbell, John Y. - 2000
This paper uses a disaggregated approach to study the volatility of common stocks at the market, industry, and firm … levels. Over the period 1962-97 there has been a noticeable increase in firm-level volatility relative to market volatility …, while the number of stocks needed to achieve a given level of diversification has increased. All the volatility measures …
Persistent link: https://www.econbiz.de/10012471179
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Monetary Policy and Asset Price Volatility
Bernanke, Ben - 2000
We explore the implications of asset price volatility for the management of monetary policy. We show that it is …
Persistent link: https://www.econbiz.de/10012471216
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Exchange Rate Returns Standardized by Realized Volatility are (Nearly) Gaussian
Andersen, Torben G. - 2000
It is well known that high-frequency asset returns are fat-tailed relative to the Gaussian distribution tails are typically reduced but not eliminated when returns are standardized by volatilities estimated from popular models such as GARCH. We consider two major dollar exchange rates, and we...
Persistent link: https://www.econbiz.de/10012471288