The paper provides new tools for the evaluation of DSGE models, and applies it to a large-scale New Keynesian dynamic stochastic general equilibrium (DSGE) model with price and wage stickiness and capital accumulation. Specifically, we approximate the DSGE model by a vector autoregression (VAR),...

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...