Microscopic simulation models are often evaluated based on visual inspection of the results.This paper presents formal econometric techniques to compare microscopic simulation (MS) models with real-life data.A related result is a methodology to compare different MS models with each other.For...

The chaos theory assumes that the returns dynamics are not normally distributed and more complex approaches have to be used to study these time series. In fact, the Fractal Market Hypothesis assumes that the returns dynamics are not independent of the investors’ attitudes and represent the...

Both parametric and semiparametric GARCH in mean estimations find a positive but insignificant relationship between expected stock returns and volatility in emerging stock markets. The 1997¡V1998 global emerging market crisis seems to induce changes in GARCH parameters.

This paper attempts to estimate stochastic discount factor (SDF) proxies nonparametrically using the conditional Hansen–Jagannathan distance. Nonparametric estimation can not only avoid misspecification when dealing with nonlinearity in the model but also provide more precise information about...

Option-implied risk-neutral densities incorporate market expectations with respect to the future course of option underlyings. Under the risk neutrality assumption various methods have been developed. In this paper, we look into two of them: parametric mixture of lognormals method and...

This paper examines risk-averse and risk-seeking investor preferences for oil spot and futures prices by using the mean-variance (MV) criterion and stochastic dominance (SD) approach. The MV findings cannot distinguish between the preferences of spot and futures markets. However, the SD tests...

We introduced in this study a model of sovereign debt with an embedded Down-and-In Put (DIP) to capture the discontinuity in sovereign debt pricing. This study suggests that debt forgiveness is a more effective solution in debt crisis, as repayment bonus or award or capital market exclusion...

We study the behavior and interaction of systematic and idiosyncratic components of risk in a cross-section of U.K. stocks. We find no clear evidence of a trend in any component of total risk, but we document different “regimes” in the behavior of each component of total risk, in their...

This paper investigates the possible existence of Granger-causal relationships in the behavior of sovereign bond markets within the European Monetary Union (EMU), with special focus on higher order causality accounting for nonlinear dependence between the variables. With the above in mind both...

Value stocks covary with aggregate consumption more than growth stocks during periods when financial wealth is low relative to consumption. However, the conditional value premium does not exhibit such countercyclical behavior. Consequently, a one-factor conditional consumption-based asset...