We propose a Bayesian procedure for exploiting small, possibly long-lag linear predictability in the innovations of a finite order autoregression. We model the innovations as having a log-spectral density that is a continuous mean-zero Gaussian process of order 1/√T. This local embedding makes...

While the Sharpe ratio is still the dominant measure for ranking risky assets, a substantial effort has been made over the past three decades to find a way to account for non-Normally distributed risks. This paper derives a generalized ranking measure which, under a regularity condition,...

We propose methods for evaluating density forecasts. We focus primarily on methodsquot; that are applicable regardless of the particular user's loss function. We illustrate the methodsquot; with a detailed simulation example, and then we present an application to density forecasting ofquot;...

Since 1968, the Survey of Professional Forecasters has asked respondents to provide aquot; complete probability distribution of expected future inflation. We evaluate the adequacy ofquot; those density forecasts using the framework of Diebold, Gunther and Tay (1997). The analysisquot; reveals...

Policy makers and market participants alike wish to understand the amount, economic significance, and concentration of derivatives trading activity. This paper suggests that systematic measuring and reporting of margin by market participants, disaggregated by asset class, would provide more...

This paper exploits a data rich environment to provide direct econometric estimates of time-varying macroeconomic uncertainty, defined as the common volatility in the unforecastable component of a large number of economic indicators. Our estimates display significant independent variations from...

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...

Climate policy is complicated by the considerable compounded uncertainties over the costs and benefits of abatement. We don't even know the probability distributions for future temperatures and impacts, making cost-benefit analysis based on expected values challenging to say the least. There are...

In this paper I analyze the relationships among investment, q, and cash flow in a tractable stochastic model in which marginal q and average q are identically equal. After analyzing the impact of changes in the distribution of the marginal operating profit of capital, I extend the model to...