The seminal work by Markowitz in 1959 introduced portfolio theory to the world. The prevailing notion since then has been that portfolio risk is non linear i.e. you cannot use Linear Programming (LP) to optimize your portfolio. We will in this paper show that simple portfolio drawdown...

The goal of this paper is to present an original and simple analysis aimed to understand why investing in capital markets can be very dangerous for "naive investors". Stock markets display often exploding volatility. They are characterized by instability and subject to external shocks. If...

Although bonds are less volatile than equities and the median bond fund holds about 200 bonds, bond investors still need to hold more than one bond fund to realize the optimal benefit of diversification. The simulation results show that three to five bond funds reduce standard deviation of...

This paper reviews endogenous growth theories in the light of the modern reality. It seems that economies which are similar in technologies and preferences are expected to converge to the same level of per capita income. The question "How are repetitions of financial crisis best predicted?" is...

In this study, a vector autoregression (VAR) model with time-varying parameters (TVP) to predict the daily Indian rupee (INR)/US dollar (USD) exchange rates for the Indian economy is developed. The method is based on characterization of the TVP as an optimal control problem. The methodology is a...

This paper examines both the linear and nonlinear causal relationships between crude oil price changes and stock market returns for the United States. In particular, the study applied a battery of unit root tests to ascertain the time series properties of crude oil price changes and stock market...

Contemporary research documents various psychological aspects of economic thought and decision-making. The main goal of our study is to analyze the role of the hindsight bias (Fischhoff [20]) and the anchoring bias (Tversky and Kahneman [53]) in perceiving economic and financial information,...

This paper discusses the role that financial innovations play in the modern financial system, aiming at identifying and systematizing the core problems and definitions related to this issue. The paper first describes the importance of the financial system and financial markets in the economy,...

This contribution studies the application of heteroskedasticity robust estimation of Vector-Autoregressive (VAR) models. VAR models have become one of the most applied models for the analysis of multivariate time series. Econometric standard software usually provides parameter estimators that...

I/O models have been widely used to assess the impacts of many changes in an economy. An I/O model is also an important tool to make forecasts and the results from an I/O model are very helpful in many policy-making processes. Many scientific findings in economics have to give credit to the I/O...