We propose a heterogeneous autoregressive (HAR) model with time-varying parameters in the form of a local linear random forest. In contrast to conventional random forests that approximate the volatility nonparametrically using local averaging, the building blocks of our forest are HAR panel...

We implement a long-horizon static and dynamic portfolio allocation involving a risk-free and a risky asset. This model is calibrated at a quarterly frequency for ten European countries. We also use maximum-likelihood estimates and Bayesian estimates to account for parameter uncertainty. We find...

This article demonstrate the connection between Sharpe ratio and stochastic dominance. Conditional Sharpe ratios (CSR) are statistical ordinates of conditional stochastic dominance (CSD) that measure lower partial risk-adjusted excess returns of an asset with respect to return distribution on...

A model of portfolio return dynamics is considered in which the price of risk is permitted to be heterogeneous. In doing this, a novel method is proposed that delivers improved out-of-sample forecasts of portfolio returns. The main innovation is the use of a set of predictors that account for...

We examine the pricing of tail risk in international stock markets. We find that the tail risk of different countries is highly integrated. Introducing a new World Fear index, we find that local and global aggregate market returns are mainly driven by global tail risk rather than local tail...

I provide evidence that risks in macroeconomic fundamentals contain valuable information about bond risk premia. I extract factors from a set of quantile-based risk measures estimated for US macroeconomic variables and document that they account for up to 31% of the variation in excess bond...

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 provide a new monthly cross-sectional measure of stock market tail risk, defined as the average of the daily cross-sectional tail risk, rather than the tail risk of the pooled daily returns within a month. The former better captures monthly tail risk rather than merely the tail risk on...

This paper studies a basket of risk statistics that are widely used to measure investment performance. Those risk statistics were used to rank the performance of the assets. The dependent information was removed from the set of risk measures that were used in the test. The risk statistics were...