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A Very Simple, Positive Semi-Definite, Heteroskedasticity and Autocorrelation Consistent Covariance Matrix
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This article is published in Research Papers in Economics.The article was published on 1991-01-01 and is currently open access. It has received 736 citations till now. The article focuses on the topics: Covariance function & Estimation of covariance matrices.read more
Citations
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Consistent Covariance Matrix Estimation with Spatially Dependent Panel Data
John C. Driscoll,Aart Kraay +1 more
TL;DR: The authors presented conditions under which a simple extension of common nonparametric covariance matrix estimation techniques yields standard error estimates that are robust to very general forms of spatial and temporal dependence as the time dimension becomes large.
Posted Content
Assessing the Contribution of Venture Capital to Innovation
TL;DR: This paper examined the influence of venture capital on patent applications in twenty industries over three decades and found that increases in venture capital activity in an industry are associated with significantly higher patenting rates.
Journal ArticleDOI
Approximately Normal Tests for Equal Predictive Accuracy in Nested Models
TL;DR: In this paper, the mean squared prediction error (MSPE) from the parsimonious model is adjusted to account for the noise in the large model's model. But, the adjustment is based on the nonstandard limiting distributions derived in Clark and McCracken (2001, 2005a) to argue that use of standard normal critical values will yield actual sizes close to, but a little less than, nominal size.
Posted Content
Risk Reduction in Large Portfolios: Why Imposing the Wrong Constraints Helps
Ravi Jagannathan,Tongshu Ma +1 more
TL;DR: In this paper, the authors show that constraining portfolio weights to be nonnegative is equivalent to using the sample covariance matrix after reducing its large elements and then form the optimal portfolio without any restrictions on portfolio weights.
Journal ArticleDOI
Production-Based Asset Pricing and the Link Between Stock Returns and Economic Fluctuations
TL;DR: In this article, a production-based asset pricing model is proposed, which is analogous to the standard consumption-based model, but it uses producers and production functions in the place of consumers and utility functions.
References
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Journal ArticleDOI
The Accuracy and Rationality of US and Australian Household Inflation Forecasts: A Comparative Study of the Michigan and Melbourne Institute Surveys*
Lloyd B. Thomas,Alan P. Grant +1 more
TL;DR: In this paper, the authors compared median household 1-year-ahead consumer price inflation forecasts generated by the Michigan survey of US households and the Melbourne Institute survey of Australian households for accuracy, bias and efficiency.
Book ChapterDOI
A New Approach for Numerical Identification of Optimal Exercise Curve
TL;DR: A parameter estimation technique to compute the put option price as well as the optimal exercise curve is presented and can be applied to the case that the volatility is a function of time and asset variables.
Journal ArticleDOI
Reviewing Taylor rules for Brazil: was there a turning-point?
TL;DR: This paper found evidences highlighting that the Brazilian monetary policy is divergent from Taylor principles, from data over January 2005 to May 2013, and using regressions estimated by OLS and GMM.
Dissertation
Understanding the capital structure of a firm through market prices
Abstract: The central theme of this thesis is to develop methods of financial mathematics to understand the dynamics of a firm’s capital structure through observations of market prices of liquid securities written on the firm. Just as stock prices are a direct measure of a firm’s equity, other liquidly traded products such as options and credit default swaps (CDS) should also be indicators of aspects of a firm’s capital structure. We interpret the prices of these securities as the market’s revelation of a firm’s financial status. In order not to enter into the complexity of balance sheet anatomy, we postulate a balance sheet as simple as Asset = Equity + Debt. Using mathematical models based on the principles of arbitrage pricing theory, we demonstrate that this reduced picture is rich enough to reproduce CDS term structures and implied volatility surfaces that are consistent with market observations. Therefore, reverse engineering applied to market observations provides concise and crucial information of the capital structure. Our investigations into capital structure modeling gives rise to an innovative pricing formula for spread options. Existing methods of pricing spread options are not entirely satisfactory beyond the log-normal model and we introduce a new formula for general spread option pricing based on Fourier analysis of the payoff function. Our development, including a flexible and general error analysis, proves the effectiveness of a fast Fourier transform implementation of the formula for the computation of spread option prices and Greeks. It is found to be easy to implement, stable, and applicable in a wide variety of asset pricing models.
Journal ArticleDOI
Is news related to GDP growth a risk factor for commodity futures returns
TL;DR: This paper found that news related to future GDP growth is a significant factor that is priced in the cross-section of commodity futures sorted by percentage net basis, which suggests that commodity futures excess returns are a compensation for risk.