Accurate prediction of the frequency of extreme events is of primary importance in many financialapplications such as Value-at-Risk (VaR) analysis. We propose a semi-parametric method for VaRevaluation. The largest risks are modelled parametrically, while smaller risks are captured by the...

We characterize asset return linkages during periods of stress by an extremal dependence measure. Contrary to correlation analysis, this nonparametric measure is not predisposed toward the normal distribution and can allow for nonlinear relationships. Our estimates for the G-5 countries suggest...

The equity premium is a key parameter in asset allocation policies. There is a vigorous debate in the literature regarding the actual measurement of the equity premium, its size and the determinants of its variation. This study aims to take stock of this literature by means of a meta-analysis....

Actual portfolios contain fewer stocks than are implied by standard financial analysis that balances the costs of diversification against the benefits in terms of the standard deviation of the returns. Suppose a safety first investor cares about downside risk and recognizes the heavytail feature...

Most stock exchange regulators around the world reacted to the 2007-2009 crisis byimposing bans or regulatory constraints on short-selling. Short-selling restrictions wereimposed and lifted at different dates in different countries, often applied to different sets ofstocks and featured different...

Exchange market pressure (EMP) measures the pressure on a currencyto depreciate. It adds to the actual depreciation a weightedcombination of policy instruments used to ward off depreciation,such as interest rates and foreign exchange interventions, where theweights are their effectiveness. The...

This paper documents that factors extracted from a large set of macroeconomic variables bear useful information for predicting monthly US excess stock returns and volatility over the period 1980-2005. Factor-augmented predictive regression models improve upon both benchmark models that only...

This paper investigates the determinants of credit spread changes on bonds denominated in euro. The analysis is carried out using a panel data on euro bonds. We try to asses the relative importance of market and idiosyncratic factors in explaining the movements in credit spread. Because credit...

The paper proposes a model for the dynamics of stock prices that incorporates increased asset co-movements during extreme market downturns in a continuous-time setting. The model is based on the construction of a multivariate diffusion with a pre-specified stationary density with tail...

Economists and financial analysts have begun to recognise the importance of the actions of other agents in the decision-making process. Herding is the deliberate mimicking of the decisions of other agents. Examples of mimicry range from the choice of restaurant, fashion and financial market...