This paper approaches the central questions of the identification and the price of risk in an international asset pricing context. We construct and use factor mimicking portfolios to obtain factor loadings for testing unconditional and conditional pricing. We use a new measure of specification...

In this paper we test the hypotheses that previous studies fail to find a significant role for currency risk in industry returns because of methodological shortcomings or because of hedging. Using a Fama-French three-factor model augmented with an exchange rate factor in which both the factor...

We apply Bayesian methods to study a common VAR-based approach for decomposing the variance of excess stock returns into components reflecting news about future excess stock returns, future real interest rates, and future dividends. We develop a new prior elicitation strategy which involves...

This paper examines the joint time series of the Samp;P 500 index and near-the-money short-dated option prices with an arbitrage-free model, capturing both stochastic volatility and jumps. Jump-risk premia uncovered from the joint data respond quickly to market volatility, becoming more...

In this paper, we use a stylized but relatively flexible structural model to describe return predictability and we derive its implications for the second moments of return and dividend-yield innovations. These implications have equivalent representations as alternative sets of reduced form...

In this study we examine a causal relationship between series of returns and traded volumes in high-frequency data. Our analysis is based on the methodology of Ghysels, Gourieroux and Jasiak (2000), who develop a qualitative framework in which dynamics of financial series are restricted to...

In this paper we suggest a new technique to construct Markov processes by means of products of copula functions, in the spirit of Darsow et al, (1992). The approach requires to define: i) a sequence of distribution functions of the increments of the process; ii) a sequence of copula functions...

We test for price discontinuities, or jumps, in a panel of high-frequency intraday returns for forty large-cap stocks and an equiweighted index from these same stocks. Jumps are naturally classified into two types: common and idiosyncratic. Common jumps affect all stocks, albeit to varying...

Recent empirical evidence demonstrates the presence of an important long memory component in realized asset return volatility. We specify and estimate multivariate models for the joint dynamics of stock returns and volatility that allow for long memory in volatility without imposing this...

This paper investigates the causal relationship between stock and volume on the Warsaw Stock Exchange. The Granger causality test and VAR model have been used. The causality test reveals that there is unidirectional causality running from prices to volume. However, impulse response functions and...