"Investors in 2000 looking back at the 1990s could have been pardoned for feeling euphoric. The S&P 500 (Chart 1.1) had risen 237% since 1992-a compound annual rate of 16.4%. This gain followed a plethora of troubles at the end of the 1980s-the savings & loan crisis that corresponded with...

Financial econometrics is a great success story in economics. Econometrics uses data and statistical inference methods, together with structural and descriptive modeling, to address rigorous economic problems. Its development within the world of finance is quite recent and has been paralleled by...