See the article in the <I>Annals of Financial Economics</I> (2013). Volume 8, issue 2, pages 1-18.<P> In this paper, we develop a modified maximum likelihood (MML) estimator for the multiple linear regression model with underlying student t distribution. We obtain the closed form of the estimators, derive...</p></i>

Actual portfolios contain fewer stocks than are implied by standard financial analysis that balances the costs of diversification against the benefits in terms of the standard deviation of the returns. Suppose a safety first investor cares about downside risk and recognizes the heavytail feature...

Risk managers use portfolios to diversify away the unpriced risk of individual securities. In this article we compare the benefits of portfolio diversification for downside risk in case returns are normally distributed with the case of fat-tailed distributed returns. The downside risk of a...

This discussion paper led to a publication in <I>Economics Letters</I> (2014). Vol. 123(3), pages 291-294.<P> Hausman (1978) developed a widely-used model specification test that has passed the test of time. The test is based on two estimators, one being consistent under the null hypothesis but...</p></i>

This article studies specific aspects of the joint replenishment problem in a realsupply chain setting. Particularly we analyze the effect on inventory performance of havingminimum order quantities for the different products in the joint order, given a complextransportation cost structure. The...

A novel simulation-based methodology is proposed to test the validity of a set of marginal time series models, where the dependence structure between the time series is taken ‘directly’ from the observed data. The procedure is useful when one wants to summarize the test results for several...

We analyse daily lead-lag patterns in US equity and credit default swap (CDS) returns. We first document that equity returns robustly lead CDS returns. However, we find that the CDS-lag is due to <I>common</I> (and not firm-specific) news and arises predominantly in response to <I>positive</I> (instead of...</i></i>

This discussion paper led to a publication in the <I>Journal of Economic Dynamics and Control</I>. Volume 31(6), pp. 1938-1970.<P> We estimate a dynamic asset pricing model characterized by heterogeneous boundedly rational agents. The fundamental value of the risky asset is publicly available to all...</p></i>

This paper surveys work on dynamic heterogeneous agent models (HAMs) in economics and finance. Emphasis is given to simple models that, at least to some extent, are tractable by analytic methods in combination with computational tools. Most of these models are behavioral models with boundedly...

We characterize asset return linkages during periods of stress by an extremal dependence measure. Contrary to correlation analysis, this nonparametric measure is not predisposed toward the normal distribution and can allow for nonlinear relationships. Our estimates for the G-5 countries suggest...