We use Bayesian techniques to select the factors in a multifactor asset pricing model when the assumption of normally distributed returns is relaxed. More precisely, we assume that asset returns are multivariate t-distributed. This setup allows us to capture the well known fat tail property of...

We assess the bivariate relation between money growth and inflation in the euro area and the United States using hybrid time-varying parameter Bayesian VAR models. Model selection based on marginal likelihoods suggests that the relation is statistically unstable across time in both regions. The...

This chapter reviews Bayesian methods for inference and forecasting with VAR models. Bayesian inference and, by extension, forecasting depends on numerical methods for simulating from the posterior distribution of the parameters and special attention is given to the implementation of the...