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The choice of instruments for mitigating economic volatility is a serious consideration for policymakers and important question in government and economics. Using a DSGE model with endogenous technology creation, we show that efficient financial markets are more effective than conventional...
Persistent link: https://www.econbiz.de/10014413996
Using U.S. data from 1926 to 2015, I show that financial skewness?a measure comparing cross-sectional upside and downside risks of the distribution of stock market returns of financial firms?is a powerful predictor of business cycle fluctuations. I then show that shocks to financial skewness are...
Persistent link: https://www.econbiz.de/10014115594
This working paper presents the general theory of the higher order "skew lognormal cascade distribution" as a … market index, and the market entropy of the stock market. Such study in the context of stochastic portfolio theory reveals … distribution, which is the lognormal cascade equation in our theory. This shows that the fluctuations of the market index are a …
Persistent link: https://www.econbiz.de/10013159227
The Great Recession has motivated economists to investigate financial uncertainty shocks as potentially important drivers of economic fluctuations. However, not all of the factors affecting financial uncertainty could cause economic downturns. In this paper, we find non-synchronized...
Persistent link: https://www.econbiz.de/10012900449
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This book is about the joint dynamics of stock returns and trading volume. We propose a dynamic equilibrium model in which agents have rational expectations and are heterogeneous in their investment opportunity. The dynamics of stock returns and trading volume implied by the model can explain...
Persistent link: https://www.econbiz.de/10013519390
Alternative strategies for predicting stock market volatility are examined. In out-of-sample forecasting experiments implied-volatility information, derived from contemporaneously observed option prices or history-based volatility predictors, such as GARCH models, are investigated, to determine...
Persistent link: https://www.econbiz.de/10009767118