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Factor Model Forecasts of Exchange Rates

Engel, Charles; Mark, Nelson; West, Kenneth D. - National Bureau of Economic Research (NBER) - 2012

We construct factors from a cross section of exchange rates and use the idiosyncratic deviations from the factors to forecast. In a stylized data generating process, we show that such forecasts can be effective even if there is essentially no serial correlation in the univariate exchange rate...

Persistent link: https://www.econbiz.de/10011103524

Can Oil Prices Forecast Exchange Rates?

Rogoff, Kenneth S; Rossi, Barbara; Ferraro, Domenico - National Bureau of Economic Research (NBER) - 2012

This paper investigates whether oil prices have a reliable and stable out-of-sample relationship with the Canadian/U.S dollar nominal exchange rate. Despite state-of-the-art methodologies, we find little systematic relation between oil prices and the exchange rate at the monthly and quarterly...

Persistent link: https://www.econbiz.de/10011227945

Measuring Uncertainty about Long-Run Prediction

Watson, Mark W.; Mueller, Ulrich - National Bureau of Economic Research (NBER) - 2013

Long-run forecasts of economic variables play an important role in policy, planning, and portfolio decisions. We consider long-horizon forecasts of average growth of a scalar variable, assuming that first differences are second-order stationary. The main contribution is the construction of...

Persistent link: https://www.econbiz.de/10010796670

Efficient Prediction of Excess Returns

Faust, Jon; Wright, Jonathan - National Bureau of Economic Research (NBER) - 2008

price movements around macroeconomic news announcements. These "surprises" cannot be used directly in forecasting--they are … not observed at the time that the forecast is made--but can nonetheless improve forecasting accuracy by reducing parameter … of forecasting excess bond and equity returns. We find substantial improvements in out-of-sample forecast accuracy for …

Persistent link: https://www.econbiz.de/10005720382

Fiscal Stability of High-Debt Nations under Volatile Economic Conditions

Hall, Robert E. - National Bureau of Economic Research (NBER) - 2013

Using a recursive empirical model of the real interest rate, GDP growth, and the primary government deficit in the U.S., I solve for the ergodic distribution of the debt/GDP ratio. If such a distribution exists, the government is satisfying its intertemporal budget constraint. One key finding is...

Persistent link: https://www.econbiz.de/10011240576

Maximum likelihood estimation of the equity premium

Wachter, Jessica A.; Avdis, Efstathios - National Bureau of Economic Research (NBER) - 2013

The equity premium, namely the expected return on the aggregate stock market less the government bill rate, is of central importance to the portfolio allocation of individuals, to the investment decisions of firms, and to model calibration and testing. This quantity is usually estimated from the...

Persistent link: https://www.econbiz.de/10010796711

Systemic Risk and the Macroeconomy: An Empirical Evaluation

Giglio, Stefano; Kelly, Bryan T.; Pruitt, Seth - National Bureau of Economic Research (NBER) - 2015

This article evaluates a large collection of systemic risk measures based on their ability to predict macroeconomic downturns. We evaluate 19 measures of systemic risk in the US and Europe spanning several decades. We propose dimension reduction estimators for constructing systemic risk indexes...

Persistent link: https://www.econbiz.de/10011185009

. . . and the Cross-Section of Expected Returns

Harvey, Campbell; Liu, Yan; Zhu, Heqing - National Bureau of Economic Research (NBER) - 2014

Hundreds of papers and hundreds of factors attempt to explain the cross-section of expected returns. Given this extensive data mining, it does not make any economic or statistical sense to use the usual significance criteria for a newly discovered factor, e.g., a t-ratio greater than 2.0....

Persistent link: https://www.econbiz.de/10010950737

Identifying Long-Run Risks: A Bayesian Mixed-Frequency Approach

Schorfheide, Frank; Yaron, Amir; Song, Dongho - National Bureau of Economic Research (NBER) - 2014

We develop a nonlinear state-space model that captures the joint dynamics of consumption, dividend growth, and asset returns. Our model consists of an economy containing a common predictable component for consumption and dividend growth and multiple stochastic volatility processes. The...

Persistent link: https://www.econbiz.de/10010821674

Wall Street vs. Main Street: An Evaluation of Probabilities

Lumsdaine, Robin L.; Loon, Rogier J.D. Potter van - National Bureau of Economic Research (NBER) - 2013

This paper challenges recent conventional wisdom of a divide between Main Street (the average American consumer) and Wall Street (financial market participants). The views of survey respondents regarding the likelihood of stock index returns exceeding specific thresholds are compared to market...

Persistent link: https://www.econbiz.de/10010821972

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