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In this paper we develop a general framework to analyze state space models with time-varying system matrices where time variation is driven by the score of the conditional likelihood. We derive a new filter that allows for the simultaneous estimation of the state vector and of the time-varying...
Persistent link: https://www.econbiz.de/10012842441
In this paper we develop a general framework to analyze state space models with timevarying system matrices where time variation is driven by the score of the conditional likelihood. We derive a new filter that allows for the simultaneous estimation of the state vector and of the time-varying...
Persistent link: https://www.econbiz.de/10012156426
Most papers in the portfolio choice literature have examined linear predictability frameworks based on the idea that … simple but flexible Vector Autoregressive (VAR) models can be expanded to produce portfolio allocations that hedge against … simple Markov switching, by studying the effects of expanding both the order of the VAR and the number/selection of predictor …
Persistent link: https://www.econbiz.de/10009658243
from 1962 to 2013 in three subperiods. We find evidence of a reduction of linear predictability in the most recent period …
Persistent link: https://www.econbiz.de/10010365211
linear predictability in the most recent period, for small and medium cap stocks. The main findings are not substantially …
Persistent link: https://www.econbiz.de/10010496122
-at-Risk (VaR) of a stock index futures portfolio for several time horizons. The relevance of the asymmetries in the estimated …
Persistent link: https://www.econbiz.de/10012292347
Purpose Our analysis is targeted at researchers in the fields of economics and finance, and we place emphasis on the incremental contributions of each paper, key research questions, study methodology, main conclusions and data and identification tactics. By focusing on these critical areas, our...
Persistent link: https://www.econbiz.de/10015077482
The volatility implied by observed market prices as a function of the strike and time to maturity form an Implied Volatility Surface (IVS). Practical applications require reducing the dimension and characterize its dynamics through a small number of factors. Such dimension reduction is...
Persistent link: https://www.econbiz.de/10003633787
Empirical studies have shown that a large number of financial asset returns exhibit fat tails and are often characterized by volatility clustering and asymmetry. Also revealed as a stylized fact is Long memory or long range dependence in market volatility, with significant impact on pricing and...
Persistent link: https://www.econbiz.de/10003636008
We propose a new approach to model high and low frequency components of equity correlations. Our framework combines a factor asset pricing structure with other specifications capturing dynamic properties of volatilities and covariances between a single common factor and idiosyncratic returns....
Persistent link: https://www.econbiz.de/10003821063