Many continuous time term structure of interest rate models assume a factor structure where the drift and volatility functions are affine functions of the state variable process. These models involve very specific parametric choices of factors and functional specifications of the drift and...

A general estimation approach combining the attractive features of method of moments with the efficiency of ML is proposed. The moment conditions are computed via the characteristic function. The two major difficulties with the implementation is that one needs to use an infinite set of moment...

It is difficult to define news, and many definitions are model-based since part of what is announced is anticipated. Therefore, news is typically defined as a residual within the context of some type of prediction model, and the prediction model locks in the sampling frequency that is the...

We use the MIDAS (Mixed Data Sampling) approach to study regressions of future realized volatility at low-frequency horizons (one to four weeks) on lagged daily and intra-daily (1) squared returns, (2) absolute returns, (3) realized volatility, (4) realized power and (5) return ranges. We...

We examine whether the sign and magnitude of discretely sampled high frequency returns have impact on future volatility predictions. We first let the 'data speak', namely with minimal interference we capture the mapping between returns over short horizons and future volatility over longer...

In this paper, we study stochastic volatility models with time deformation. Such processes relate to early work by Mandelbrot and Taylor (1967), Clark (1973), Tauchen and Pitts (1983), among others. In our setup, the latent process of stochastic volatility evolves in a operational time which...

This paper provides robustness checks and analytical derivations to supplement the material presented in the paper Skewness in Expected Macro Fundamentals and the Predictability of Equity Returns: Evidence and Theory.The paper to which these Appendices apply is available at the following URL:...

We document that the first and third cross-sectional moments of the distribution of GDP growth rates made by professional forecasters can predict equity excess returns, a finding which is robust to controlling for a large set of well established predictive factors. We show that introducing...

We use a sample of option prices, and the method of Bakshi, Kapadia and Madan (2003), to estimate the ex ante higher moments of the underlying individual securities' risk-neutral returns distribution. We find that individual securities' volatility, skewness, and kurtosis are strongly related to...

It is well known that temporal aggregation has adverse effects on Granger causality tests. Time series are often sampled at different frequencies. This is typically ignored, and data are merely aggregated to the common lowest frequency. We develop a set of Granger causality tests that explicitly...