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Robust Portfolio Choice with Learning in the Framework of Regret: Single-Period Case

Lim, Andrew E. B.; Shanthikumar, J. George; Vahn, Gah-Yi - In: Management Science 58 (2012) 9, pp. 1732-1746

In this paper, we formulate a single-period portfolio choice problem with parameter uncertainty in the framework of relative regret. Relative regret evaluates a portfolio by comparing its return to a family of benchmarks, where the benchmarks are the wealths of fictitious investors who invest...

Persistent link: https://www.econbiz.de/10010990462

Confronting model misspecification in macroeconomics

Waggoner, Daniel F.; Zha, Tao - In: Journal of Econometrics 171 (2012) 2, pp. 167-184

We estimate a Markov-switching mixture of two familiar macroeconomic models: A richly parameterized DSGE model and a corresponding BVAR model. We show that the Markov-switching mixture model dominates both individual models and improves the fit considerably. Our estimation indicates that the...

Persistent link: https://www.econbiz.de/10010588324

Is Regime Switching in Stock Returns Important in Portfolio Decisions?

Tu, Jun - In: Management Science 56 (2010) 7, pp. 1198-1215

The stock market displays regime switching between upturns and downturns. This paper provides a Bayesian framework for making portfolio decisions that takes this regime switching into account, together with asset pricing model uncertainty and parameter uncertainty. The findings reveal that the...

Persistent link: https://www.econbiz.de/10009293043

Bayesian Portfolio Analysis

Avramov, Doron; Zhou, Guofu - In: Annual Review of Financial Economics 2 (2010) 1, pp. 25-47

This paper reviews the literature on Bayesian portfolio analysis. Information about events, macro conditions, asset pricing theories, and security-driving forces can serve as useful priors in selecting optimal portfolios. Moreover, parameter uncertainty and model uncertainty are practical...

Persistent link: https://www.econbiz.de/10008835308

A General Approach to Recovering Market Expectations from Futures Prices With an Application to Crude Oil

Baumeister, Christiane; Kilian, Lutz - C.E.P.R. Discussion Papers - 2014

has proved difficult in practice, because the presence of a timevarying risk premium often renders the futures price a … be recovered by adjusting the futures price by the estimated risk premium, a common problem in applied work is that there … are as many measures of market expectations as there are estimates of the risk premium. We propose a general solution to …

Persistent link: https://www.econbiz.de/10011083547

A general approach to recovering market expectations from futures prices with an application to crude oil

Baumeister, Christiane; Kilian, Lutz - Center for Financial Studies - 2014

Persistent link: https://www.econbiz.de/10010958503

The mechanics of VAR forecast pooling—A DSGE model based Monte Carlo study

Henzel, Steffen R.; Mayr, Johannes - In: The North American Journal of Economics and Finance 24 (2013) C, pp. 1-24

This paper analyzes the mechanics of VAR forecast pooling and quantifies the forecast performance under varying conditions. To fill the gap between empirical and purely theoretical research we run a Monte Carlo study and simulate the data from different New Keynesian DSGE models. We find that...

Persistent link: https://www.econbiz.de/10011056701

The Virtues of VAR Forecast Pooling – A DSGE Model Based Monte Carlo Study

Henzel, Steffen; Mayr, Johannes - ifo Leibniz-Institut für Wirtschaftsforschung an der … - 2009

Since the seminal article of Bates and Granger (1969), a large number of theoretical and empirical studies have shown that pooling different forecasts of the same event tends to outperform individual forecasts in terms of forecast accuracy. However, the results remain heterogenous regarding the...

Persistent link: https://www.econbiz.de/10005046847

Sovereign default and macroeconomic tipping points

Joy, Mark - Central Bank of Ireland - 2012

This paper examines the impact of macroeconomic fundamentals on the probability of sovereign default and the probability of exit from default while allowing explicitly for model uncertainty. Model uncertainty is addressed by employing Bayesian model-averaging techniques, averaging over a very...

Persistent link: https://www.econbiz.de/10010601988

Iranian-Oil-Free Zone and International Oil Prices

Farzanegan, Mohammad Reza; Parvari, Mozhgan Raeisian - Volkswirtschaft Abteilung, Fachbereich … - 2014

One of the main elements of economic sanctions against Iran due to its nuclear and military programs is crude oil exportation restrictions in addition to investment in Iranian energy related projects. Senders of such sanction are interested in understanding the impacts of such embargos on...

Persistent link: https://www.econbiz.de/10010759877