This paper presents a new modelling framework for day–ahead electricity prices based on multivariate Lévy semistationary (MLSS) processes. Day–ahead prices specify the prices for electricity delivered over certain time windows on the next day and are determined in a daily auction. Since...

The literature on excess return prediction has considered a wide array of estimation schemes, among them unrestricted and restricted regression coefficients. We consider bootstrap aggregation (bagging) to smooth parameter restrictions. Two types of restrictions are considered: positivity of the...

Following Diebold and Li (2006), we use the Nelson-Siegel (NS, 1987) yield curve factors. However the NS yield curve factors are not supervised for a specifi?c forecast target in the sense that the same factors are used for forecasting different variables, e.g., output growth or infl?ation. We...

In an incomplete market setting with heterogeneous prior beliefs, we show that public information can have a substantial impact on the ex ante cost of capital, trading volume, and investor welfare. In a model with exponential utility investors and an asset with a normally distributed dividend,...

We examine US housing price forecastability using a common factor approach based on a large panel of 122 economic time series. We find that a simple three-factor model generates an explanatory power of about 50% in one-quarter ahead in-sample forecasting regressions. The predictive power of the...

In an incomplete market setting with heterogeneous prior beliefs, I show that public information and strike price of option have substantial infl?uence on asset pricing in option markets, by investigating an absolute option pricing model with negative exponential utility investors and normally...

In a framework of heterogeneous beliefs, I investigate a two-date consumption model with continuous trading over the interval [0; T], in which information on the aggregate consumption at time T is revealed by an Ornstein-Uhlenbeck Bridge. This information structure allows investors to speculate...

In this paper we propose a new multivariate GARCH model with time-varying conditional correlation structure. The time-varying conditional correlations change smoothly between two extreme states of constant correlations according to a predetermined or exogenous transition variable. An LM-test is...

This paper proposes a new modelling framework for electricity forward markets, which is based on ambit fields. The new model can capture many of the stylised facts observed in energy markets. One of the main differences to the traditional models lies in the fact that we do not model the...

This paper introduces a Duration Hidden Markov Model to model bull and bear market regime switches in the stock market; the duration of each state of the Markov Chain is a random variable that depends on a set of exogenous variables. The model not only allows the endogenous determination of the...