In this paper we consider two cases of pairs trading strategies: a conditional statistical arbitrage method and an implicit statistical arbitrage method. We use a simulation-based Bayesian procedure for predicting stable ratios, defined in a cointegration model, of pairs of stock prices. We show...

We investigate the direct connection between the uncertainty related to estimated stable ratios of stock prices and risk and return of two pairs trading strategies: a conditional statistical arbitrage method and an implicit arbitrage one. A simulation-based Bayesian procedure is introduced for...

Dynamic stochastic general equilibrium (DSGE) models use modern macroeconomic theory to explain and predict comovements of aggregate time series over the business cycle and to perform policy analysis. We explain how to use DSGE models for all three purposes – forecasting, story-telling, and...

We study the transmission of monetary shocks and monetary policy with a behavioral model, corrected for potential misspecification using the DSGE-VAR framework elaborated by DelNegro and Schorfheide (2004). In particular, we investigate if the central bank should react to movements in the...

We forecast the term structure of U.S. Treasury zero-coupon bond yields by analyzing a range of models that have been used in the literature. We assess the relevance of parameter uncertainty by examining the added value of using Bayesian inference compared to frequentist estimation techniques,...

This paper contributes to the productivity literature by using results from firm-level productivity studies to improve forecasts of macro-level productivity growth. The paper employs current research methods on estimating firm-level productivity to build times-series components that capture the...

We propose a new approach to deal with structural breaks in time series models. The key contribution is an alternative dynamic stochastic specification for the model parameters which describes potential breaks. After a break new parameter values are generated from a so-called baseline prior...

Weak empirical evidence near and at the boundary of the parameter region is a predominant feature in econometric models. Examples are macroeconometric models with weak information on the number of stable relations, microeconometric models measuring connectivity between variables with weak...