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Book part
Publication date: 30 November 2011

Massimo Guidolin

I review the burgeoning literature on applications of Markov regime switching models in empirical finance. In particular, distinct attention is devoted to the ability of…

Abstract

I review the burgeoning literature on applications of Markov regime switching models in empirical finance. In particular, distinct attention is devoted to the ability of Markov Switching models to fit the data, filter unknown regimes and states on the basis of the data, to allow a powerful tool to test hypotheses formulated in light of financial theories, and to their forecasting performance with reference to both point and density predictions. The review covers papers concerning a multiplicity of sub-fields in financial economics, ranging from empirical analyses of stock returns, the term structure of default-free interest rates, the dynamics of exchange rates, as well as the joint process of stock and bond returns.

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Missing Data Methods: Time-Series Methods and Applications
Type: Book
ISBN: 978-1-78052-526-6

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Book part
Publication date: 30 November 2011

Massimo Guidolin

I survey applications of Markov switching models to the asset pricing and portfolio choice literatures. In particular, I discuss the potential that Markov switching models…

Abstract

I survey applications of Markov switching models to the asset pricing and portfolio choice literatures. In particular, I discuss the potential that Markov switching models have to fit financial time series and at the same time provide powerful tools to test hypotheses formulated in the light of financial theories, and to generate positive economic value, as measured by risk-adjusted performances, in dynamic asset allocation applications. The chapter also reviews the role of Markov switching dynamics in modern asset pricing models in which the no-arbitrage principle is used to characterize the properties of the fundamental pricing measure in the presence of regimes.

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Missing Data Methods: Time-Series Methods and Applications
Type: Book
ISBN: 978-1-78052-526-6

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Book part
Publication date: 29 February 2008

Massimo Guidolin and Carrie Fangzhou Na

We address an interesting case – the predictability of excess US asset returns from macroeconomic factors within a flexible regime-switching VAR framework – in which the…

Abstract

We address an interesting case – the predictability of excess US asset returns from macroeconomic factors within a flexible regime-switching VAR framework – in which the presence of regimes may lead to superior forecasting performance from forecast combinations. After documenting that forecast combinations provide gains in predictive accuracy and that these gains are statistically significant, we show that forecast combinations may substantially improve portfolio selection. We find that the best-performing forecast combinations are those that either avoid estimating the pooling weights or that minimize the need for estimation. In practice, we report that the best-performing combination schemes are based on the principle of relative past forecasting performance. The economic gains from combining forecasts in portfolio management applications appear to be large, stable over time, and robust to the introduction of realistic transaction costs.

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Forecasting in the Presence of Structural Breaks and Model Uncertainty
Type: Book
ISBN: 978-1-84950-540-6

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Book part
Publication date: 30 November 2011

Abstract

Details

Missing Data Methods: Time-Series Methods and Applications
Type: Book
ISBN: 978-1-78052-526-6

Book part
Publication date: 30 November 2011

David M. Drukker

This volume includes papers related to missing-data methods for time-series econometricians with applications in macroeconomics and empirical finance.

Abstract

This volume includes papers related to missing-data methods for time-series econometricians with applications in macroeconomics and empirical finance.

Details

Missing Data Methods: Time-Series Methods and Applications
Type: Book
ISBN: 978-1-78052-526-6

Content available
Book part
Publication date: 29 February 2008

Abstract

Details

Forecasting in the Presence of Structural Breaks and Model Uncertainty
Type: Book
ISBN: 978-1-84950-540-6

Book part
Publication date: 29 February 2008

Abstract

Details

Forecasting in the Presence of Structural Breaks and Model Uncertainty
Type: Book
ISBN: 978-1-84950-540-6

Book part
Publication date: 29 February 2008

David E. Rapach and Mark E. Wohar

We thank the Simon Center for Regional Forecasting at the John Cook School of Business at Saint Louis University – especially Jack Strauss, Director of the Simon Center…

Abstract

We thank the Simon Center for Regional Forecasting at the John Cook School of Business at Saint Louis University – especially Jack Strauss, Director of the Simon Center and Ellen Harshman, Dean of the Cook School – for its generosity and hospitality in hosting a conference during the summer of 2006 where many of the chapters appearing in this volume were presented. The conference provided a forum for discussing many important issues relating to forecasting in the presence of structural breaks and model uncertainty, and participants viewed the conference as helping to significantly improve the quality of the research appearing in the chapters of this volume.3 This volume is part of Elsevier's new series, Frontiers of Economics and Globalization, and we also thank Hamid Beladi for his support as an Editor of the series.

Details

Forecasting in the Presence of Structural Breaks and Model Uncertainty
Type: Book
ISBN: 978-1-84950-540-6

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