We consider unobserved components time series models where the components are stochastically evolving over time and are subject to stochastic volatility. It enables the disentanglement of dynamic structures in both the mean and the variance of the observed time series. We develop a simulated...

The ratio of consumption to total household wealth (i.e., tangible assets plus unobserved human wealth) is commonly calculated from the estimation of a log-linear version of the household intertemporal budget constraint as a cointegrating relationship between consumption, assets and earnings...

Increasingly, professional forecasters and academic researchers present model-based and subjective or judgment-based forecasts in economics which are accompanied by some measure of uncertainty. In its most complete form this measure is a probability density function for future values of the...

We investigate covariance matrix estimation in vast-dimensional spaces of 1,500 up to 2,000 stocks using fundamental factor models (FFMs). FFMs are the typical benchmark in the asset management industry and depart from the usual statistical factor models and the factor models with observed...

The potential relationship between domestic environmental regulation and internationalcompetitiveness has evoked various speculations. The common neoclassical train of thought is thatstrict environmental regulation is detrimental to the competitiveness of industry, and that itinduces phenomena...

Using a limiting approach to portfolio credit risk, we obtain analyticexpressions for the tail behavior of the distribution of credit losses. We showthat in many cases of practical interest the distribution of these losses haspolynomial ('fat') rather than exponential ('thin') tails. Our...

Using US data from June 1984 to July 1999, we show that the impact of firm-specificcharacteristics like size and book-to-price on future excess stock returns varies considerably overtime. The impact can be either positive or negative at different times. This time variation ispartially...

The empirical economic growth literature is criticized for its lack ofrobustness. For different definitions of robustness, conclusions vary from 'almost everycorrelation is fragile' to 'a substantial number of explanatory variables are robust.' Were-analyze the empirical results of the economic...

The linear Gaussian state space model for which the common variance istreated as a stochastic time-varying variable is considered for themodelling of economic time series. The focus of this paper is on thesimultaneous estimation of parameters related to the stochasticprocesses of the mean part...

We study the performance of two analytical methods and one simulation method for computing in-sample confidence bounds for time-varying parameters. These in-sample bounds are designed to reflect parameter uncertainty in the associated filter. They are applicable to the complete class of...