We propose simulation-based forecasting methods for the noncausal vector autoregressive model proposed by Lanne and Saikkonen (2012). Simulation or numerical methods are required because the prediction problem is generally nonlinear and, therefore, its analytical solution is not available. It...

This paper provides new evidence on the role of exchange rates in forecasting commodity prices. Consistent with previous studies, we find that commodity currencies hold out-of-sample predictive power for commodity prices when using standard linear predictive regressions. After we reconsider the...

The recent financial crisis appears to point to credit booms as the most important driver of crises. However, could macroeconomic factors such as income inequality potentially be the real root cause of financial crises? We explore a broad variety of financial and macroeconomic variables and...

We introduce a simple nonparametric approach to compute impulse response functions. We first search for clusters of recurrent patterns of observations resembling two sets of given initial conditions, one of which contains the impact effect of the structural shock of interest. Then, to trace out...

We develop a volatility decomposition derived from flexible local projections to quantify the relative contributions of expected discount rates and cash flows to the variation of dividend yields. Local projections enable the incorporation of large information sets, the use of monthly data along...

We introduce a flexible utility-based empirical approach to directly determine asset allocation decisions between risky and risk-free assets. This is in contrast to the commonly used two-step approach where least squares optimal statistical equity premium predictions are first constructed to...

We show that financial crises are preceded by changes in specific types of narrative information contained in newspaper article titles. Our novel international dataset and the resulting empirical evidence are gathered by integrating information from a large panel of economic news articles in...

We show that financial crises are preceded by changes in specific types of narrative information contained in newspaper article titles. Our novel international dataset and the resulting empirical evidence are gathered by integrating information from a large panel of economic news articles in...