Using a Dynamic Semiparametric Factor Model (DSFM) we investigate the term structure of interest rates. The proposed methodology is applied to monthly interest rates for four southern European countries: Greece, Italy, Portugal and Spain from the introduction of the Euro to the recent European...

Using a Dynamic Semiparametric Factor Model (DSFM) we investigate the term structure of interest rates. The proposed methodology is applied to monthly interest rates for four southern European countries: Greece, Italy, Portugal and Spain from the introduction of the Euro to the recent European...

In the paper we introduce an empirical approximation of the log-optimal investment strategy that guarantees an almost optimal growth rate of investments. The proposed strategy also considers the effects of portfolio rearrangement costs on growth optimality and advises a suboptimal portfolio for...

In project appraisal under uncertainty, the economic reliability of a measure of financial efficiency depends on its strong NPV-consistency, meaning that the performance metric (i) supplies the same recommendation in accept-reject decisions as the NPV, (ii) ranks competing projects in the same...

When used to price popular bond futures options, the Black model is subject to a moneyness bias similar to the Black-Scholes stock index option bias. It is shown that a suitably modified version of Stutzer's canonical stock option pricing model (Stutzer, J.Finance, 1996, 1633-52 ) also helps...

We examine the impact of tail risk on the return dynamics of size, book-to-market ratio, momentum, and idiosyncratic volatility sorted portfolios. Our time-series analyses document significant portfolio return exposures to aggregate tail risk. In particular, portfolios that contain small, value,...

This paper considers multiple measures of risk and return and appraises the performance of equity markets in the cross-section using a non-parametric procedure known as data envelopment analysis (DEA). In the appraisal, measures of risk (return) are treated as input (output) variables of the DEA...

In an exchange economy with recursive preferences (Epstein and Zin, 1989), we propose a novel nonparametric generalized method of moment (GMM) series approach to estimate unknown policy functions which are recursively specified in a system of nonlinear conditional expectation models...

The economic reliability of a performance metric depends on its consistency with the Net Present Value (NPV). We use the new notion of strong NPV-consistency for comparing the Straight-Line rate of return (belonging to the class of AIRR metrics) and the traditional Internal Rate of Return (IRR)....

This paper quantifies the premium demanded by the investors for bearing the corporate default risk. We propose a novel approach that exploits the information in both credit default swap (CDS) spreads and stock prices, using the pricing restrictions provided by a structural model of credit risk....