We evaluate the forecast performance of a range of theory-based and atheoretical models explaining exchange rates and interest rates in US, UK and Japan. The decision-making environment is fully described for an investor who optimally allocates portfolio shares to domestic and foreign assets....

A recent revision to the preliminary measurement of GDP(E) growth for 2003Q2 caused considerable press attention, provoked a public enquiry and prompted a number of reforms to UK statistical reporting procedures. In this paper, we compute the probability of “substantial revisions” that are...

In this paper we provide a framework that explains how the market risk premium, defined as the difference between forward prices and spot forecasts, depends on the risk preferences of market players. In commodities markets this premium is an important indicator of the behaviour of buyers and...

This paper analyses the interaction between fiscal and monetary policy using the original Barro and Gordon (1983) model extended to include fiscal policy, dynamics and the level of institutional quality, measured as bureaucratic corruption. It is found that delegating monetary policy to an...

This paper analyses the impact of the emergence of new funds on the portfolio decisions of mutual fund managers who are evaluated on the basis of relative performance within a dynamic model. Recent theoretical literature has pointed to the inefficiencies in portfolio selection caused by relative...

Most of the recent literature dealing with the modeling of financial assets assumes that the underlying dynamics of equity prices follow a jump process or a Levy process. This is done to incorporate rare or extreme events not captured by Gaussian models. Of those financial models proposed, the...

This paper provides a theoretical framework of endogenous network formation that yields testable predictions for the network architectures generated by a particular informal institution common in village economies. We test the implications of the model on data from rural Ethiopia. In contrast to...

In this article we price a multiple-interruptible contract for the electricity market in England and Wales under a mean-reverting jump-diffusion model with seasonality. We do so by combining forward contracts with a swing option which can be exercised a pre-specified number of times. We price...

Methods are described for the appropriate use of data obtained and analysed in real time to represent the output gap. The methods employ cointegrating VAR techniques to model real time measures and realisations of output series jointly. The model is used to mitigate the impact of data revisions;...