This paper studies the relation between liquidity and optimal portfolio allocations. Given that the portfolio problem of a constant relative risk aversion investor does not have a closed-form solution, we use a nonparametric approach to estimate the optimal allocations. Using a sample of NYSE...

We estimate MIDAS regressions with various (bi)power variations to predict future volatility - measured via increments in quadratic variation. Instead of pre-determining the (bi)power variation we parameterize it and estimate the intra-daily return power transformation that optimally predicts...

This paper deals with the estimation of the risk–return trade-off. We use a MIDAS model for the conditional variance and allow for possible switches in the risk–return relation through a Markov-switching specification. We find strong evidence for regime changes in the risk–return relation....