We propose a new estimator of multivariate ex-post volatility that is robust to microstructure noise and asynchronous data timing. The method is based on Fourier domain techniques, which have been widely used in discrete time series analysis. The advantage of this method is that it does not...

We investigate a new separable nonparametric model for time series, which includes many ARCH models and AR models already discussed in the literature. We also propose a new estimation procedure called LIVE, or local instrumental variable estimation, that is based on a localization of the...

We examine the relationship between the risk premium on the S&P500 index total return and its conditional variance. We propose a new semiparametric model in which the conditional variance process is parametric, while the conditional mean is an arbitrary function of the conditional variance. For...

We introduce a general and flexible framework for hedge fund performance evaluation and asset allocation: stochastic dominance (SD) theory. Our approach utilizes statistical tests for stochastic dominance to compare the returns of hedge funds. We form hedge fund portfolios by using SD criteria...

We investigate a class of estimators for Linear Regression models where the dependent variable is subject to bid-ask censoring.  Our estimation method is based on a definition of error that is zero when the predictor lies between the actual bid price and ask price, and linear outside this...

This paper develops a new estimation procedure for characteristic-based factor models of stock returns. It describes a factor model in which the factor betas are smooth nonlinear functions of observed security characteristics. It develops an estimation procedure that combines nonparametric...

This paper estimates the implied stochastic process of the volatility of the Swiss market index (SMI) from the prices of options written on it. A GARCH(1,1) model is shown to be a good parameterization of the process. Then, using the GARCH option pricing model of Duan (1991), the implied...

We provide a test of the Monday effect in daily stock index returns. Unlike previous studies we define the Monday effect based on the stochastic dominance criterion. This is a stronger criterion than those based on comparing means used in previous work and has a well defined economic meaning. We...

A positive Lyapunov exponent is one pratical definition of chaos. We develop a formal test for chaos in a noisy system based on the sign of the Lyapunov exponent. The test utilizes nonparametric regression techniques including local quadratic regression and neural networks. When our procedures...

We develop new tests of the capital asset pricing model that take account of and are valid under the assumption that the distribution generating returns is elliptically symmetric; this assumption is neccessary and sufficient for the validity of the CAPM. Our test is based on semi-parametric...