This paper derives relationships between frequency-domain and standard time-domain distributed-lag and autoregessive moving-average models. These relations are well known in the literature but are presented here in a pedogogic form in order to facilitate interpretation of spectral and...

An appropriate metric for the success of an algorithm to forecast the variance of the rate of return on a capital asset could be the incremental profit from substituting it for the next best alternative. We propose a framework to assess incremental profits for competing algorithms to forecast...

To forecast future option prices, autoregressive models of implied volatility derived from observed option prices are commonly employed [see Day and Lewis (1990), and Harvey and Whaley (1992)]. In contrast, the ARCH model proposed by Engle (1982) models the dynamic behavior in volatility,...

Ultra-high frequency data are complete transactions data which inherently arrive at random times. Marked point processes provide a theoretical framework for analysis of such data sets. The ACD model developed by Engle and Russell (1995) is then applied to IBM transactions data to develop...

This paper investigates the degree of short run and long run comovement in U.S. sectoral output data by estimating sectoral trends and cycles. A theoretical model based on Long and Plosser (1983) is used to derive a reduced form for sectoral output from first principles. Cointegration and common...

In this paper, we develop the theoretical and empirical properties of a new class of multi-variate GARCH models capable of estimating large time-varying covariance matrices, Dynamic Conditional Correlation Multivariate GARCH. We show that the problem of multivariate conditional variance...

Many ways exist to measure and model financial asset volatility. In principle, as the frequency of the data increases, the quality of forecasts should improve. Yet, there is no consensus about a true' or best' measure of volatility. In this paper we propose to jointly consider absolute daily...

Macroprudential stress tests have been employed by regulators in the United States and Europe to assess and address the solvency condition of financial firms in adverse macroeconomic scenarios. We provide a test of these stress tests by comparing their risk assessments and outcomes to those from...

This paper tests for cointegration between regional output of an industry and national output of the same industry. An equilibrium economic theory is presented to argue for the plausibility of cointegration, however, regional economic forecasting using the shift and share framework often acts as...

Value at Risk has become the standard measure of market risk employed by financial institutions for both internal and regulatory purposes. Despite its conceptual simplicity, its measurement is a very challenging statistical problem and none of the methodologies developed so far give satisfactory...