Conventional wisdom usually suggests that agents should use all the data they have to make the best possible prediction. In this paper, however, it is shown that agents may sometimes be able to make better predictions by throwing away old data. The optimality criterion agents adopt is the mean...

I present evidence that higher frequency measures of inflation expectations outperform lower frequency measures of inflation expectations in tests of accuracy, predictive power, and rationality. For decades, the academic literature has focused on three survey measures of expected inflation: the...

Conventional wisdom usually suggests that agents should use all the data they have to make the best possible prediction. In this paper, it is shown that agents may make better predictions by discarding old data if their model is mis-specified. The applicability of the results to some economic...

Part of conventional wisdom glaned from econometric theory and the "learning" literature is that agents ahould use all the data they have for prediction. In this paper it is shown that agents can improve their prediction by throwing away data.

Learning with bounded memory in stochastic frameworks is incomplete in the sense that the learning dynamics cannot converge to an REE. The properties of the dunamics arising from such rules are studied for models with steady states. If in standard linear models the REE is in a certain sense...

Convention wisdom usually suggests that agents should use all the data they have to make the best possible prediction. In this paper it is shown that agents may sometimes be able to make better predictions by throwing away data. The optimality criterion agents adopt is the mean squared criterion.

Our model, which is adapted from Feltham and Ohlson (1995) and Ohlson (1995) and extends Dechow and Dichev (2002), characterizes the information about future cash flows reflected in accruals. The model reveals that investors can extract from accruals information about next period's economic...

I develop methods that produce consistent estimates of the Vasicek-Basel IRB (VAIRB) credit risk model parameters. I apply these methods to Moody's data on corporate defaults over the period 1920–2008 and assess the model fit and construct hypothesis tests using bootstrap methods. The results...

The globalisation on financial markets and the development of financial derivatives has increased not only chances but also potential risk within the banking industry. Especially market risk has gained major significance since market price variation of interest rates, stocks or exchange rates...

We provide empirical evidence of volatility forecasting in relation to asymmetries present in the dynamics of both return and volatility processes. Using recently-developed methodologies to detect jumps from high frequency price data, we estimate the size of positive and negative jumps and...