Financial analysts assume that the reliability of predictions derived from regression analysis improves with sample size. This is generally true because larger samples tend to produce less noisy results than smaller samples. But this is not always the case. Some observations are more relevant...

Investors sometimes have strong convictions that a distinctive economic regime will prevail in the period ahead and therefore would like to form a portfolio that reflects the expected returns, standard deviations, and correlations of assets during such a regime. To do so, they typically isolate...

It is common practice to forecast social, political, and economic outcomes by polling people about their intentions. This approach is direct, but it can be unreliable in settings where it is hard to identify a representative sample, or where subjects have an incentive to conceal their true...

In light of the COVID 19 crisis, the Federal Reserve has carried out stress tests to assess if major banks have sufficient capital to ensure their viability should a new and perhaps unprecedented crisis emerge. The Fed argues that the scenarios underpinning these stress tests are severe but...

Many sophisticated investors rely on scenario analysis to select a portfolio. These investors define prospective economic scenarios, assign probabilities to them, translate the scenarios into expected asset class returns, and select the portfolio with the highest expected return or expected...

The authors introduce a new methodology for determining the relative importance of fiscal and monetary policy to promote growth and stabilize inflation. They apply this methodology to a panel of data that spans 66 years and 17 countries. Their analysis shows that, on average, monetary policy is...