We develop a new empirical approach to term structure analysis that allows testing for time-varying risk premiums and arbitrage opportunities in models with both unobservable factors and factors identified as the innovations to observed macroeconomic variables. Factors may play double roles as...

In this paper we study what professional forecasters predict. We use spectral analysis and state space modeling to decompose economic time series into a trend, business-cycle, and irregular component. To examine which components are captured by professional forecasters, we regress their...

Literature studying comovement in commodity prices provides mixed evidence for whether commodity markets are segmented or driven by common factors. We provide a joint framework to study comovement across 24 of the most traded commodities over 20 years. The framework benefits from using the whole...

We investigate the added value of combining density forecasts focused on a specific region of support. We develop forecast combination schemes that assign weights to individual predictive densities based on the censored likelihood scoring rule and the continuous ranked probability scoring rule...

We study why a majority of trades happen during the pit hours, i.e. when the trading pit is open. We examine the case of 30-year U.S. Treasury futures. The pit hour activity clustering cannot be explained by the informativeness of pit trading or the liquidity. Instead, a feedback mechanism...

The implied volatility surface is the collection of volatilities implied by option contracts for different strike prices and time-to-maturity. We study factor models to capture the dynamics of this three-dimensional implied volatility surface. Three model types are considered to examine...

We explore intraday variation in the contribution to price discovery across different exchanges. We estimate a structural model with time-varying parameters in state space form using Maximum Likelihood. An extensive simulation study provides evidence for the accuracy of this method. We analyze...

This paper considers the uncertainty associated with upcoming Federal Open Market Committee (FOMC) announcements and the extent to which participants in the fed funds futures market prepare for such announcements before they actually occur. We demonstrate that markets set up well in advance of...

We model the impact of financial conditions on asset market volatilities and correlations. We extend the Spline-GARCH model for volatility and DCC model for correlation to allow for inclusion of indexes that measure financial conditions. In our empirical application we consider daily stock...

We study the relationship between order flow and volatility. To this end we develop a comprehensive framework that simultaneously controls for the effects of macro announcements and order flow on prices and the effect of macro announcements on volatility. Using high-frequency 30-year U.S....