This chapter surveys recent econometric methodologies for inference in large dimensional conditional factor models in finance. Changes in the business cycle and asset characteristics induce time variation in factor loadings and risk premia to be accounted for. The growing trend in the use of...

The introduction by regulators of mandatory margining for bilateral OTCs is going to have a major impact on the derivatives market, particularly in light of the additional funding costs and liquidity requirements that large financial institutions will face. Fabrizio Anfuso, Daniel Aziz, Paul...

This paper studies large dimensional factor models with threshold-type regime shifts in the loadings. We estimate the threshold by concentrated least squares, and factors and loadings by principal components. The estimator for the threshold is super consistent, with convergence rate that depends...

The purpose of this research is to determine whether bankruptcy forecasting models are subject to industry and time specific effects. A sample of 15,848 firms was obtained from the Compustat and CRSP databases, spanning the time period 1950 to 2013, of which 396 were bankrupt. Using five models...

This paper studies the empirically relevant problem of estimation and inference in diffusion index forecasting models with structural instability. Factor model and factor augmented regression both experience a structural change with different unknown break dates. In the factor model, we estimate...

This paper proposes a measure of real-time inflation expectations based on metadata, i.e., data about data, constructed from internet search queries performed on the search engine Google. The forecasting performance of the Google Inflation Search Index (GISI) is assessed relative to 37 other...

This study sheds new light on the question of whether or not sentiment surveys, and the expectations derived from them, are relevant to forecasting economic growth and stock returns, and whether they contain information that is orthogonal to macroeconomic and financial data. I examine 16...

This paper evaluates the predictive content of a set of alternative monthly indicators of global economic activity for nowcasting and forecasting quarterly world GDP using mixed-frequency models. We find that a recently proposed indicator that covers multiple dimensions of the global economy...