Conditional maximum Sharpe ratios implied by fully flexible four-factor and five-factor Gaussian term structure models are astronomically high. Estimation of term structure models subject to a constraint on their Sharpe ratios uncovers properties that hold for a wide range of Sharpe ratios....

This chapter discusses estimation, specification testing, and model selection of predictive density models. In particular, predictive density estimation is briefly discussed, and a variety of different specification and model evaluation tests due to various authors including Christoffersen and...