This paper proposes a novel method for conducting policy analysis with potentially misspecified dynamic stochastic general equilibrium (DSGE) models and applies it to a New Keynesian DSGE model along the lines of Christiano, Eichenbaum, and Evans (JPE 2005 and Smets and Wouters (JEEA 2003)....

Suppose a fund manager uses predictors in changing port-folio allocations over time. How does predictability translate into portfolio decisions? To answer this question we derive a new model within the Bayesian framework, where managers are assumed to modulate the systematic risk in part by...