The successful active portfolio manager has to have at least two main competencies: Felicitous asset allocation choice and the competence to do so at the right point in time. Based on an extension of Grinold and Kahn’s Fundamental Law of Active Management, this paper describes a method to...

We develop a rational expectations model of financial bubbles and study how the risk-return interplay is incorporated into prices. We retain the interpretation of the leading Johansen-Ledoit-Sornette model: namely, that the price must rise prior to a crash in order to compensate a representative...

Sudan is one of the countries which economy depends on rain fed agriculture and also facing recurring cycles of natural drought. For many decades, recurrent drought, with intermittent severe droughts, had become normal phenomenon in Sudan. This paper presents linear stochastic models known as...

This study explores the volatility models and evaluates the quality of one-step ahead forecasts of volatility constructed by (1) GARCH, (2) TGARCH, (3) Risk metrics and (4) Historical volatility. Volatility forecasts suggest that TGARCH performs relatively best in term of MSPE, followed by...

A review of the general state-space modeling framework. The discussion focuses heavily on the three prediction problems of forecasting, filtering, and smoothing within the state- space context. Numerous examples are provided detailing special cases of the state-space model and its use in solving...

For decades, the academic literature has focused on three survey measures of expected inflation: the Livingston Survey, the Survey of Professional Forecasters, and the Michigan Survey. While these measures have been useful in developing models of forecasting inflation, the data are low frequency...

I study the consumption responses of heterogeneous households following changes in both house prices and interest rates. I show the common assumption that household period utility is separable in housing and consumption can be consistent with the observed co-movement between these two series...

New approach to determining no arbitrage conditions is presented in this paper. Determined by supply and demand prices are used instead of assumptions about price processes. Special attention was made to alternative numeraire change technique that was obtained using presented approach. Results...

We propose a generalized method of moment (GMM) estimator of the number of latent factors in linear factor models. The method is appropriate for panels a large (small) number of cross-section observations and a small (large) number of time-series observations. It is robust to heteroskedasticity...

The goal of this paper is to analyze the effect of OTC-DVP (over the counter delivery versus payment) fixed income market introduction in Slovenia on the term structure estimation and on the volatility of zero coupon yields and forward interest rates. For the purpose of the analysis Slovenian...