Gravity equations are a widely used tool in the International Business (IB) literature to explain country-level trade and FDI flows. Against the background of its increased popularity and data availability, a range of commonly made econometric mistakes have recently been discussed in the...

This paper proposes a novel approach to determine whether mutual funds time the market. The proposed approach builds on a heterogeneous agent model, where investors switch between cash and stocks depending on a certain switching rule. This approach is more flexible, intuitive, and parsimonious...

The literature on agent-based models has been highly successful in replicating many stylized facts of financial and macroeconomic time series. Over the past decade, however, also advances in the estimation of such models have been made. Due to the inherent heterogeneity of agents and...

GARCH-type models have been very successful in describing the volatility dynamics of financial return series for short periods of time. However, for example macroeconomic events may cause the structure of volatility to change and the assumption of stationarity is no longer plausible. In order to...

This paper analyzes the sources of the differential beliefs of market participants in the foreign exchange market and their relative role in forming exchange rate expectations. We find that there are distinct periods of high and low dispersion and document that dispersion arises because of a...

We present an alternative measurement method of investor overconfidence, using unique survey data on stock market predictions of investors. We apply the Parkinson estimate based on extreme bounds around the stock forecast to deduce investor confidence. The results support overconfidence.

GARCH-type models have been very successful in describing the volatility dynamics of financial return series for short periods of time. However, the time-varying behavior of investors, for example, may cause the structure of volatility to change and the assumption of stationarity is no longer...