In 2008, the S&P500 aggregated a loss of 30.16% during three selected days. Unfortunately, benchmark risk measures didn't forecast these hazards. Consequently, we witness a growing interest in coherent risk measures, sensitive to high moments and heavy tail risk. Such measures were proposed by...

This study investigates the potential of news sentiment in predicting stock market volatility using a large news database. We augment traditional time series models of realized volatility with sentiment scores of macroeconomic and firm-specific news. Our results demonstrate that incorporating...

DSGE (Dynamic stochastic general equilibrium) models are the common workhorse of modern macroeconomic theory. Whereas story-telling and policy analysis were in the forefront of applications since its inception, the forecasting perspective of DSGE models is only recently topical. In this study,...

We investigate the transmission of financial shocks through the macroeconomy. To that end we develop an endogenous regime-switching structural vector autoregressive model with time-varying transition probabilities. First, we allow for the transition probabilities to be dependent on the state of...

We conduct a novel empirical analysis of the role of leverage of financial institutions for the transmission of financial shocks to the macroeconomy. For that purpose, we develop an endogenous regime-switching structural vector autoregressive model with time-varying transition probabilities that...

We conduct a novel empirical analysis of the role of leverage of financial institutions for the transmission of financial shocks to the macroeconomy. For that purpose, we develop an endogenous regime switching structural vector autoregressive model with time-varying transition probabilities that...

We conduct a novel empirical analysis of the role of leverage of financial institutions for the transmission of financial shocks to the macroeconomy. For that purpose we develop an endogenous regime-switching structural vector autoregressive model with time-varying transition probabilities that...

We propose a predictor of market bubbles, crashes and corrections that is based on the relationship between the following two ratios: (Market value of the firm compared to its intrinsic value, MV/IV) and the (return on capital of the firm versus its cost of capital, R/C*). We apply the model to...

Recent developments allow a nonparametric separation of the continuous sample path component and the jump component of realized volatility. The jump component has very different time series properties than the continuous component, and accounting for this allows improved forecasting of future...