This paper shows that the asymptotic normal approximation is often insufficiently accurate for volatility estimators based on high frequency data. To remedy this, we compute Edgeworth expansions for such estimators. Unlike the usual expansions, we have found that in order to obtain meaningful...

High-frequency financial data are not only discretely sampled in time but the time separating successive observations is often random. We analyze the consequences of this dual feature of the data when estimating a continuous-time model. In particular, we measure the additional effects of the...

We develop and implement a technique for closed-form maximum likelihood estimation (MLE) of multifactor affine yield models. We derive closed-form approximations to likelihoods for nine Dai and Singleton (2000) affine models. Simulations show our technique very accurately approximates true (but...

When a continuous-time diffusion is observed only at discrete dates, not necessarily close together, the likelihood function of the observations is in most cases not explicitly computable. Researchers have relied on simulations of sample paths in between the observations points, or numerical...

In this paper, we propose a parametric spectral estimation procedure for constructing heteroskedasticity and autocorrelation consistent (HAC) covariance matrices. We establish the consistency of this procedure under very general conditions similar to those considered in previous research, and we...

This paper presents a new numerical method for solving general equilibrium models with many assets. The method can be applied to models where there are heterogeneous agents, time-varying investment opportunity sets, and incomplete markets. It also can be used to study models where the...

It has recently been observed that when equations of motion for state variables are nonautonomous, optimal control problems involving Uzawa's endogenous rate of time preference cannot be solved using the change-of-variables method common in the literature. Instead, the problem must be solved by...

We analyze how uncertainty about when information about future returns to a project may be revealed affects investment. While 'good news' about future returns boosts investment, 'good news about news' (that is news that information may arrive sooner) is shown to depress investment. We show that...

Recent work by Said and Dickey (1984 ,1985) , Phillips (1987), and Phillips and Perron(1988) examines tests for unit roots in the autoregressive part of mixed autoregressive-integrated-moving average (ARIHA) models (tests for stationarity). Monte Carlo experiments show that these unit root tests...

This article compares two leading models of asset pricing: the capital asset pricing model (CAPM) and the arbitrage pricing theory (APT): I argue that while the APT is compatible with the data available for testing theories of asset pricing, the CAPM is not. In reaching this conclusion emphasis...