The importance of covariance modelling has long been recognised in the field of portfolio management and large dimensional multivariate problems are increasingly becoming the focus of research. This paper provides a straightforward and commonsense approach toward investigating whether simpler...

Within the context of volatility timing and portfolio selection this paper considers how best to estimate a volatility model. Two issues are dealt with, namely the frequency of data used to construct volatility estimates, and the loss function used to estimate the parameters of a volatility...

Risk aversion in game theory is usually modelled using expected utility, which has been critized early on leading to an extensive literature on generalized expected utility. In this paper we are first to apply μ-σ theory to the analysis of (static) games. μ-σ theory is widely accepted in the...

Economic events such as expansions and recessions in economic activity, bull and bear markets in stock prices and financial crises have long attracted substantial interest. In recent times there has been a focus upon predicting the events and constructing Early Warning Systems of them....

The occurrence of extreme movements in the spot price of electricity represent a significant source of risk to retailers. Electricity markets are often structured so as to allow retailers to purchase at an unregulated spot price but then sell to consumers at a heavily regulated price. As such,...

Fiscal restraints have been argued to force today's governments to internalize the externalities that result from extensive borrowing on future electorates and governments as well as on other countries by causing fiscal instability. In this article we provide an alternative argument for fiscal...

Evidence on behavior of experts in credence goods markets raises an important causality issue: Do "fair prices" induce "good behavior", or do "good experts" post "fair prices"? To answer this question we propose and test a model with three seller types: "the good" choose fair prices and behave...

In response to the widespread criticism that macro-economists failed to predict the global recession coming from the GFC, we look at whether recessions in Turkey can be predicted. Because the growth in Turkish GDP is quite persistent one might expect this is possible. But it is the sign of GDP...

This paper develops a quasi-maximum likelihood (QML) procedure for estimating the parameters of multi-dimensional stochastic differential equations. The transitional density is taken to be a time-varying multivariate Gaussian where the first two moments of the distribution are approximately the...

This paper is concerned with evaluating Value-at-Risk estimates. It is well known that using only binary variables, such as whether or not there was an exception, sacrifices too much information. However, most of the specification tests (also called backtests) available in the literature, such...