Model risk as part of the operational risk is a serious problem for financial institutions. As the pricing of derivatives as well as the computation of the market or credit risk of an institution depend on statistical models the application of a wrong model can lead to a serious over- or...

When decomposing differences in average economic outcome between two groups of individuals, it is common practice to base the analysis on logarithms if the dependent variable is nonnegative. This paper argues that this approach raises a number of undesired statistical and conceptual issues...

We propose a simple and robust two-step estimator for discount factors in a class of dynamic discrete choice models. The estimator follows from constructive identification results, including a new identification result for a general, time separable discount function. The estimator is derived as...

This note explores the robustness of Hamilton's (Econometrica, 1989) two-regime Markov switching model framework for capturing business-cycle patterns. Applying his exact specification to a revised version of real GNP, I find parameter estimates that are similar to those he reported only when I...