Preprint · 2026
We propose a new measure of mutual fund manager ability: "efficiency" is the ability to accrue the risk premium associated with a risk factor. The familiar abnormal return, or alpha, is shown to be the sum of two distinct measures of ability: "aggr ...
Full textCite
Preprint · 2026
A popular method for comparing the economic value of covariance matrix forecasts is to use competing forecasts in a minimum variance portfolio problem and compare the out-of-sample variances of the resulting portfolios. This paper considers the sta ...
Full textCite
Preprint · 2023
We propose methods to improve the forecasts from generalized autoregressive score (GAS) models (Creal, et al., 2013; Harvey, 2013) by localizing their parameters using decision trees and random forests. These methods avoid the curse of dimensionali ...
Full textCite
Preprint · 2021
Many important economic decisions are based on a parametric forecasting model that is known to be good but imperfect. We propose methods to improve out-of-sample forecasts from a misspecified model by estimating its parameters using a form of local ...
Full textCite
Preprint · 2020
We propose a new decomposition of the traditional market beta into four semibetas depending on the signed covariation between the market and individual asset returns. Consistent with the pricing implications from a mean-semivariance framework, we ...
Full textCite
Preprint · 2019
Rational respondents to economic surveys may report as a point forecast any measure of the central tendency of their (possibly latent) predictive distribution, for example the mean, median, mode, or any convex combination thereof. We propose tests ...
Full textCite
Preprint · 2017
Expected Shortfall (ES) is the average return on a risky asset conditional on the return being below some quantile of its distribution, namely its Value-at-Risk (VaR). The Basel III Accord, which will be implemented in the years leading up to 2019, ...
Full textCite
Preprint · 2017
We propose a new decomposition of the realized covariance matrix into components based on the signs of the underlying high-frequency returns. Under an asymptotic setting in which the sampling interval goes to zero, we derive the asymptotic properti ...
Full textCite
Preprint · 2016
We propose a new framework for modeling and forecasting common financial risks based on (un)reliable realized covariance measures constructed from high-frequency intraday data. Our new approach explicitly incorporates the effect of measurement erro ...
Full textCite
Preprint · 2015
This paper proposes a new model for high-dimensional distributions of asset returns that utilizes mixed frequency data and copulas. The dependence between returns is decomposed into linear and nonlinear components, enabling the use of high frequenc ...
Full textCite
Preprint · 2015
This paper proposes a new model for high-dimensional distributions of asset returns that utilizes mixed frequency data and copulas. The dependence between returns is decomposed into linear and nonlinear components, enabling the use of high frequenc ...
Full textCite
Preprint · 2015
This paper presents flexible new models for the dependence structure, or copula, of economic variables based on a latent factor structure. The proposed models are particularly attractive for relatively high dimensional applications, involving fifty ...
Full textCite
Preprint · 2013
This paper proposes a new class of copula-based dynamic models for high dimension conditional distributions, facilitating the estimation of a wide variety of measures of systemic risk. Our proposed models draw on successful ideas from the literatur ...
Full textCite
Preprint · 2013
This paper provides evidence of the impact of hedge funds on asset markets. We construct a simple measure of the aggregate illiquidity of hedge fund portfolios, based on the cross-sectional average Â…first order autocorrelation coefficient of hedge ...
Full textCite
Preprint · 2013
This paper proposes a new class of dynamic copula models for daily asset returns that exploits information from high frequency (intra-daily) data. We augment the generalized autoregressive score (GAS) model of Creal, et al. (2012) with high frequen ...
Full textCite
Preprint · 2011
We analyze the reliability of voluntary disclosures of financial information, focusing on widely-employed publicly available hedge fund databases. Tracking changes to statements of historical performance recorded at different points in time between ...
Full textCite
Preprint · 2009
We investigate whether the betas of individual stocks vary with the release of firm-specific news. Using daily firm-level betas estimated from intra-day prices for all constituents of the S&P 500 index, we find that the betas of individual stoc ...
Full textCite
Preprint · 2008
We develop an unobserved components approach to study surveys of forecasts containing multiple forecast horizons. Under the assumption that forecasters optimally update their beliefs about past, current and future state variables as new information ...
Full textCite
Preprint · 2007
The liquidity of hedge funds' investments is of great interest both to hedge fund investors and to market regulators. We propose a method for determining the factors that affect the (unobservable)liquidity of hedge fund investments. Our method expl ...
Full textCite
Preprint · 2005
We show that the use of a conditionally unbiased, but imperfect, volatility proxy can lead to undesirable outcomes in some commonly used methods for evaluating and comparing conditional variance forecasts: the true conditional variance may be rejec ...
Full textCite
Preprint · 2005
Evaluation of forecast optimality in economics and finance has almost exclusively been conducted on the assumption of mean squared error loss under which forecasts should be unbiased and forecast errors serially uncorrelated at the single period ho ...
Full textCite
Preprint · 2004
A definition for a common factor for bivariate time series is suggested by considering the decomposition of the conditional density into the product of the marginals and the copula, with the conditioning variable being a common factor if it does no ...
Full textCite
Preprint · 2004
Evidence that asset returns are more highly correlated during volatile markets and during market downturns (see Longin and Solnik, 2001, and Ang and Chen, 2002) has lead some researchers to propose alternative models of dependence. In this paper we ...
Full textCite
Preprint · 2004
One can consider the concept of market neutrality as having "breadth" and "depth": "Breadth" reflects the number of market risks to which the hedge fund is neutral, while "depth" reflects the "completeness" of the neutrality of the fund to market r ...
Full textCite
Preprint · 2001
In this paper we analyze and interpret the quote price dynamics of 100 NYSE stocks stratified by trade frequency. We specify an error-correction model for the log difference of the bid and the ask price with the spread acting as the error-correctio ...
Full textCite
Preprint · 2001
Linear correlation is only an adequate means of describing the dependence between two random variables when they are jointly elliptically distributed. When the joint distribution of two or more variables is not elliptical the linear correlation coe ...
Full textCite
Preprint · 2001
The theory of conditional copulas provides a means of constructing flexible multivariate density models, allowing for time-varying conditional densities of each individual variable, and for time-varying conditional dependence between the variables. ...
Full textCite
