AutoRegression (VAR) and a fully structural Dynamic Stochastic General Equilibrium (DSGE) model, at forecasting financial returns. We … show that the DSGE model outperforms the unrestricted VAR at forecasting financial returns in the long term and generates … substantially higher Sharpe ratios for mean-variance allocations. Even if it contains fewer unknown parameters, the DSGE model …

Stochastic Volatility (SV), along with Mixed Data Sampling (MIDAS) regressions, which enable us to incorporate the impacts of …