Using a modified DCC-MIDAS specification that allows the long-term correlation component to be a function of multiple explanatory variables, we show that the stock-bond correlation in the US, the UK, Germany, France, and Italy is mainly driven by inflation and interest rate expectations as well...

This paper first develops a new approach, which is based on the Nelson-Siegel term structure factor-augmented model, to compute the VaR of bond portfolios. We then applied the model to examine whether information contained on macroeconomic variables and financial shocks can help to explain the...

This paper presents the theoretical and applicative model elaborated by Harry Markowitz on the determination of the structure of the efficient securities portfolio. In this sense, in order to determine the structure of the efficient Markowitz portfolio (PE), a Lagrange function is built and...

Many financial decisions, such as portfolio allocation, risk management, option pricing and hedge strategies, are based on forecasts of the conditional variances, covariances and correlations of financial returns. The paper shows an empirical comparison of several methods to predict...

A novel dynamic asset-allocation approach is proposed where portfolios as well as portfolio strategies are updated at every decision period based on their past performance. For modeling, a general class of models is specified that combines a dynamic factor and a vector autoregressive model and...

The purpose of this paper is to make a quantitative and qualitative critical analyse regarding the three important aspects of stock market evolution. First, the forecasting problems are presented and analyse in order to establish the main problems and the potential solutions. Second, the...

Unlike passive management, where investors almost do not buy and sell securities, active management involves a set of trading rules that govern investment decisions regarding mainly market timing. In this paper, we take the basics of active management and the two fund separation approach, to...

We inspect the price volatility before, during, and after financial asset bubbles in order to uncover possible commonalities and check empirically whether volatility might be used as an indicator or an early warning signal of an unsustainable price increase and the associated crash. Some...

We investigate market selection and bet pricing in a simple Arrow security economy which we show is equivalent to the repeated prediction market models studied in the literature. We derive the condition for long run survival of more than one agent (the crowd) and quantify the information content...

This paper proposes a novel approach to the combination of conditional covariance matrix forecasts based on the use of the Generalized Method of Moments (GMM). It is shown how the procedure can be generalized to deal with large dimensional systems by means of a two-step strategy. The finite...