This paper develops a dynamic portfolio selection model incorporating economic uncertainty for business cycles. It is assumed that the financial market at each point in time is defined by a hidden Markov model, which is characterized by the overall equity market returns and volatility. The risk...

The Reversible Jump Markov Chain Monte Carlo (RJMCMC) method can enhance Bayesian DSGE estimation by sampling from a posterior distribution spanning potentially nonnested models with parameter spaces of different dimensionality. We use the method to jointly sample from an ARMA process of unknown...

We relax the standard assumption in the dynamic stochastic general equilibrium (DSGE) literature that exogenous processes are governed by AR(1) processes and estimate ARMA (p,q) orders and parameters of exogenous processes. Methodologically, we contribute to the Bayesian DSGE literature by using...

This paper examines the lead/lag relations between size-sorted portfolio returns through the lens of financial cycles governing these returns using a novel econometric methodology. Specifically, we develop a Markov-switching vector autoregressive model that allows for imperfect synchronization...