An empirical evaluation is provided of the robustness of the conditional capital asset pricing model (CAPM) with human capital to explain the cross-sectional variability of security returns. This model has been evaluated in the literature using the growth rate in per capita labor income. This...

A new kind of mixture autoregressive model with GARCH errors is introduced and applied to the U.S. short-term interest rate. According to the diagnostic tests developed in the article and further informal checks, the model is capable of capturing both of the typical characteristics of the...

The class of parametric dynamic latent variable models is becoming increasingly popular in finance and economics. Latent factor models, switching regimes models, stochastic volatility models, and dynamic disequilibrium models are only a few examples of this class of model. Inference in this...

This article investigates the extent to which options on the Australian Stock Price Index can be explained by parametric and nonparametric option pricing techniques. In particular, comparisons are made of out-of-sample option pricing performance and hedging performance. The dataset differs from...

Price variations at speculative markets exhibit positive autocorrelation and cross correlation. Due to large parameter spaces necessary for joint modeling of variances and covariances, multivariate parametric volatility models become easily intractable in practice. We propose an adaptive...

This article formulates a bivariate point process to jointly analyze trade and quote arrivals. In microstructure models, trades may reveal private information that is then incorporated into new price quotes. This article examines the speed of this information flow and the circumstances that...

In this article we introduce a decomposition of the joint distribution of price changes of assets recorded trade-by-trade. Our decomposition means that we can model the dynamics of price changes using quite simple and interpretable models which are easily extended in a great number of...

We show that, for three common SARV models, fitting a minimum mean square linear filter is equivalent to fitting a GARCH model. This suggests that GARCH models may be useful for filtering, forecasting, and parameter estimation in stochastic volatility settings. To investigate, we use simulations...

This article exploits the Itô's formula to derive the conditional moments vector for the class of interest rate models that allow for nonlinear volatility and flexible jump specifications. Such a characterization of continuous-time processes by the Itô conditional moment generator noticeably...