The purpose of this paper is to explore and evaluate smooth approximation methods for value functions. These approximation methods are increasingly important in numerical dynamic programming since they allow researchers to solve models with a multitude of continuous state variables. In this...

We develop a demand model for goods that are subject to habit formation. We show that consumption plans of forward-looking individuals depend on preferences, current period prices, and individual beliefs about the evolution of future prices. Moreover, an increase in price uncertainty reduces...

We consider expectations of the form E[logy|x] = Σ_j=1-super-d α_j log x_j as a good starting point for a more general analysis. We show why this naturally leads to the following flexible functional form: E[y|x] = f(Σ_j=1-super-dh_j(x_j)), where f(ċ) and the h_j(ċ)'s are estimated by cubic splines....

This paper proposes a new nonparametric estimator for general regression functions with multiple regressors. The method used here is motivated by a remarkable result derived by Kolmogorov (1957) and later tightened by Lorentz (1966). In short, any continuous function f(x_1,...,x_d) has the...

Actual investment performance reflects the underlying strategy of the portfolio manager and the execution costs incurred in realizing those objectives. Execution costs, especially in illiquid markets, can dramatically reduce the notional return to an investment strategy. This paper examines the...

Estimation and inference for weighted nonlinear least squares regressions are examined for the case in which the regressors are stochastic, rather than fixed, and where erros may be both heteroscedastic and serially correlated. The usual least squares parameter covarience matrix estimator may be...