The approximate agents' wealth and price invariant densities of the prediction market model presented in Kets et al.(2014) is derived using the Fokker-Planck equation of the associated continuous-time jump process. We show that the approximation obtained from the evolution of log-wealth...

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...

Risk parity methods focused on volatility have gained traction in the last decade. A few extensions have been proposed, including tail risk parity. The authors show that, at its limits, tail risk parity converges towards the risk parity portfolio or the tangency portfolio. The authors also...

We propose a continuous-time portfolio selection model that explains the active-passive continuum. Our model illuminates the pivotal role of expert opinions and factors in the asset allocation process. In the model, investors aim to outperform a benchmark. As securities and benchmark's drift...

The level of capital tax gains has high explanatory power regarding the question of what drives economic inequality. On this basis, the authors develop a simple, yet micro-founded portfolio selection model to explain the dynamics of wealth inequality given empirical tax series in the US. The...

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...

Predictability is time and frequency dependent. We propose a new forecasting method - forecast combination in the frequency domain - that takes this fact into account. With this method we forecast the equity premium and real GDP growth rate. Combining forecasts in the frequency domain produces...

Enrolment rates to higher education reveal quite large variation over time which cannot be explained by productivity shocks alone. We develop a human capital investment model in an overlapping generations framework that features endogenous fluctuations in the demand for education. Agents are...

Climate change is predicted to substantially alter forest growth. Optimally, forest owners should take these future changes into account when making rotation decisions today. However, the fundamental uncertainty surrounding climate change makes predicting these shifts hard. Hence, this paper...

In the data mining and machine learning fields, forecasting the direction of price change can be generally formulated as a supervised classfii cation. This paper attempts to predict the direction of daily changes of the Nasdaq Composite Index (NCI) and of the Standard & Poor's 500 Composite...