This paper reexamines the main arguments of whether or not monetary policy should respond to asset bubbles. The question of how the central bank should respond to an asset bubble can be reformulated in two ways. First, how does the central bank respond while an asset bubble is growing, and...

Oil prices increased dramatically during 2004-6. Industry experts initially attributed these price increases to fundamental factors such as the rise in global demand, but also because of disruptions in the supply of oil. The price increases however were so substantial that additional factors are...

The equity premium of the S&P 500 Index is explained in this paper by several variables that can be grouped into fundamental, behavioral and macroeconomic factors. We hypothesize that the statistical significance of these variables changes across economic regimes. The three regimes we consider...

The Stochastic Discount Factor (SDF) methodology is a general and convenient framework for asset pricing. SDF encapsulates all the modeling uncertainties and its advantage is that we do not require the knowledge of investors' preferences. Suitable specification of SDF is, therefore, critical. It...

In this paper we consider two new independent variables as inputs to the Taylor Rule. These are the equity and housing momentum variables and are introduced to investigate the potential usefulness of these two variables in guiding the Fed to lean against potential bubbles. Such effectiveness...

Numerous studies have analyzed the movements of the S&P 500 Index using several methodologies such as technical analysis, econometric modeling, time series techniques and theories from behavioral finance. In this paper we take a novel approach. We use daily closing prices for the S&P 500 Index...

During the past few decades, significant theoretical advances in portfolio theory and asset pricing have substantially increased our understanding of how to construct optimal portfolios. These theoretical developments have challenged professional portfolio management to develop appropriate tools...

This paper develops and compares several methods of forecasting the S&P 500 Index using only data based on the closing value and trained over a six-decade data set. The methodologies include a C5.0 decision tree, a neural network, and a group of forecasts based on training set patterns of...

The standard hypothesis concerning the behavior of asset returns states that they follow a random walk in discrete time or a Brownian motion in continuous time. The Brownian motion process is characterized by a quantity, called the Hurst exponent, which is related to some fractal aspects of the...

This paper reviews both theoretical and empirical issues regarding inflation and evaluates the contribution of Kyrtsou and Labys. Analytically it is very difficult to propose a general theory of inflation because as economies evolve over time both new causes of inflation emerge and the...