This paper characterizes the term structure of risk measures such as Value at Risk (VaR) and expected shortfall under different econometric approaches including multivariate regime switching, GARCH-in-mean models with student-t errors, two-component GARCH models and a non-parametric bootstrap....

This paper considers a variety of econometric models for the joint distribution of US stock and bond returns in the presence of regime switching dynamics. While simple two- or three-state models capture the univariate dynamics in bond and stock returns, a more complicated four state model with...

In this paper, we present a new approach to trend/cycle decomposition under the assumption that the trend is the permanent component and the cycle is the transitory component of an integrated time series. The permanent component is defined as the steady-state level of the series, a definition...

We use Markov Chain Monte Carlo methods to augment a vector autoregressive system with a latent business cycle index that is negative during recessions and positive during expansions. We then sample counterfactual values of the macroeconomic variables in the case where the latent business cycle...

We investigate the power and size performance of unit root tests when the data undergo Markov regime switching. All tests, including those robust to a single break in trend growth rate, have low power against a process with a Markov-switching trend. Under the null hypothesis, we find previously...

Aggregate time series provide evidence of short term dynamic adjustment that appears to be governed by complex or negative real eigenvalues. This finding is at odds with the predictions of reasonably parameterized, convex one-sector growth models with complete markets. We study life cycle...

We uncover a positive, empirical risk-return tradeoff in the stock market after controlling for the covariance of stock market returns with the value premium. The underlying premise is that, as conjectured by Fama and French (1996), the value premium is a proxy for time-varying investment...

We study a stylized theory of the volatility reduction in the U.S. after 1984—the Great Moderation—which attributes part of the stabilization to less volatile shocks and another part to more difficult inference on the part of Bayesian households attempting to learn the latent state of the...

Recent studies using long-run restrictions question the validity of the technology-driven real business cycle hypothesis. We propose an alternative identi cation that maximizes the contribution of technology shocks to the forecast-error variance of labor productivity at a long, but finite,...