Recently, consistent measures of the ex-post covariation of financial assets based on noisy high-frequency data have been proposed. A related strand of literature focuses on dynamic models and covariance forecasting for high-frequency data based covariance measures. The aim of this paper is to...

We analyze the applicability of economic criteria for volatility forecast evaluation based on unconditional measures of portfolio performance. The main theoretical finding is that such unconditional measures generally fail to rank conditional forecasts correctly due to the presence of a bias...

This paper finds empirical support for the habit persistence model of Camp- bell and Cochrane (1999) along both cross sectional and time-series dimensions of the US stock market. GMM estimations show that the model is able to explain a substantial part of the cross sectional variation of returns...

We show that the compensation for rare events accounts for a large fraction of the equity and variance risk premia in the S&P 500 market index. The probability of rare events vary significantly over time, increasing in periods of high market volatility, but the risk premium for tail events...

Recent research has focused on modelling asset prices by Itô semimartingales. In such a modelling framework, the quadratic variation consists of a continuous and a jump component. This paper is about inference on the jump part of the quadratic variation, which can be estimated by the difference...

We suggest an iterated GMM approach to estimate and test the consumption based habit persistence model of Campbell and Cochrane (1999), and we apply the approach on annual and quarterly Danish stock and bond returns. For comparative purposes we also estimate and test the standard CRRA model. In...

We propose a new and flexible non-parametric framework for estimating the jump tails of Itô semimartingale processes. The approach is based on a relatively simple-to-implement set of estimating equations associated with the compensator for the jump measure, or its "intensity", that only...

This paper reviews basic notions of return variation in the context of a continuous-time arbitrage-free asset pricing model and discusses some of their applications. We first define return variation in the infeasible continuous-sampling case. Then we introduce realized measures obtained from...

We provide a new framework for estimating the systematic and idiosyncratic jump tail risks in financial asset prices. The theory underlying our estimates are based on in-fill asymptotic arguments for directly identifying the systematic and idiosyncratic jumps, together with conventional...