This study develops Bayesian methods for estimating the parameters of a stochastic switching regression model. Markov Chain Monte Carlo methods, data augmentation, and Gibbs sampling are used to facilitate estimation of the posterior means. The main feature of these methods is that the posterior...

In this paper we develop a framework for the study of financial equilibrium in the case of sectors in the economy, each of which is faced with two objectives/criteria in his portfolio selection decision making. In particular, we first present the bicriteria decision model of an individual...

The Modern Portfolio Theory of Markowitz maximized portfolio expected return subject to holding total portfolio variance below a selected level. Digital Portfolio Theory is an extension of Modern Portfolio Theory, with the added dimension of memory. Digital Portfolio Theory decomposes the...

Classical methods for computing the value-at-risk(VaR) do not account for the large price variations observed in financial markets. The historical method is subject to event risk and may miss some fundamental market evolution relevant to VaR; the variance/covariance method tends to underestimate...

This paper examines the performance of simple reinforcement learning algorithms in a stationary environment and in a repeated game where the environment evolves endogenously based on the actions of other agents. Some types of reinforcement learning rules can be extremely sensitive to small...

Testing asset pricing models is closely related to specification search analysis in quantitative economics. Most specification search processes select models based on some goodness of fit statistic (such as R-squared or related F). The effects of the sequential search on the statistical tests...

This paper concerns computational models in environmental economics and policy, particularly so-called integrated assessment models. For the most part, such models are simply extensions of standard neoclassical growth models, extended by including the environment and pollution generation. We...

We investigate two parametric approaches and one non-parametric approach to estimating Internet users' value-of-time, an important characteristic of demand for Internet services. The advantages of these approaches are made clear and their limitations discussed. The models are tested with data...

Applied game theory generally shows possible game situations, discussing their implications. This paper derives an estimation procedure for non-cooperative games, using cross-section data. During the transformation of the data an attempt is made to pick extreme points, to find the outer borders...

This contribution presents an analysis within the framework of the tolerable windows approach (TWA) applied to climate change decision support. The TWA starts with an explicit normative specification of guard-rails, which exclude intolerable climate impacts as well as unacceptable socioeconomic...