We show empirically that survey-based measures of expected inflation are significant and strong predictors of future aggregate stock returns in several industrialized countries both in-sample and out-of-sample. By empirically discriminatingbetween competing sources of this return predictability...

A small strand of recent literature is occupied with identifying simultaneity in multipleequation systems through autoregressive conditional heteroscedasticity. Since thisapproach assumes that the structural innovations are uncorrelated, any contemporaneousconnection of the endogenous variables...

This paper seeks to disentangle the sources of correlations between high-, mid- and lowcap stock indexes from the German prime standard. In principle, such comovement can arise from direct spillover between the variables or due to common factors. By standard means, these different components are...

Recently, Frittelli and Scandolo ([9]) extend the notion of risk measures, originally introduced by Artzner, Delbaen, Eber and Heath ([1]), to the risk assessment of abstract financial positions, including pay offs spread over different dates, where liquid derivatives are admitted to serve as...

Market option prices in last 20 years confirmed deviations from the Black and Scholes (BS) models assumptions, especially on the BS implied volatility. Implied binomialtrees (IBT) models capture the variations of the implied volatility known as \volatility smile". They provide a discrete...

Dimension reduction techniques for functional data analysis model and approximate smooth random functions by lower dimensional objects. In many applications the focus of interest lies not only in dimension reduction but also in the dynamic behaviour of the lower dimensional objects. The most...

Stock picking is the field of financial analysis that is of particular interest for many professional investors and researchers. In this study stock picking is implemented via binary classification trees. Optimal tree size is believed to be the crucial factor in forecasting performance of the...

A great proportion of stock dynamics can be explained using publicly availableinformation. The relationship between dynamics and public information may be ofnonlinear character. In this paper we offer an approach to stock picking by employing so-called decision trees and applying them to XETRA...

Empirical studies have shown that a large number of financial asset returns exhibit fat tails and are often characterized by volatility clustering and asymmetry. Also revealed as a stylized fact is Long memory or long range dependence in market volatility, with significant impact on pricing and...

The behaviour of market agents has always been extensively covered in the literature. Risk averse behaviour, described by von Neumann and Morgenstern (1944) via a concave utility function, is considered to be a cornerstone of classical economics. Agents prefer a fixed profit over uncertain...