Forecasting using factor models based on large data sets have received ample attention due to the models’ ability to increase forecast accuracy with respect to a range of key macroeconomic variables in the US and the UK. However, forecasts based on such factor models do not uniformly...

We study the short-term price behavior of Phase 2 EU emission allowances. We model returns and volatility dynamics, and we demonstrate that a standard ARMAX-GARCH framework is inadequate for this modeling and that the gaussianity assumption is rejected due to a number of outliers. To improve the...

Stock return predictability is subject to great uncertainty. In this paper we use the model confidence set approach to quantify uncertainty about expected utility from investment, accounting for potential return predictability. For monthly US data and six representative return prediction models,...

This chapter surveys the methods available for extracting forward-looking information from option prices. We consider volatility, skewness, kurtosis, and density forecasting. More generally, we discuss how any forecasting object which is a twice differentiable function of the future realization...

An important issue in modelling economic time series is whether key unobserved components representing trends, seasonality and calendar components, are deterministic or evolutive. We address it by applying a recently proposed Bayesian variable selection methodology to an encompassing linear...

This paper considers discrete time GARCH and continuous time SV models and uses these for American option pricing. We first of all show that with a particular choice of framework the parameters of the SV models can be estimated using simple maximum likelihood techniques. Hence the two types of...

Using a CCAPM based risk adjustment model, consistent with general asset pricing theory, I perform corporate valuations of a large sample of stocks listed on NYSE, AMEX and NASDAQ. The model is different from the standard CAPM model in the sense that it discounts forecasted residual income for...