We provide a framework for evaluating and improving multivariate density forecasts. Among other things, the multivariate framework lets us evaluate the adequacy of density forecasts involving cross-variable interactions, such as time-varying conditional correlations. We also provide conditions...

This paper re-examines the incentives of mutual fund managers arising from investor flows. We provide evidence that the convexity of the flow-performance relationship varies with economic activity. We show that the effect is economically large and is driven neither by abnormal years nor by...

We propose methods for evaluating density forecasts. We focus primarily on methodsquot; that are applicable regardless of the particular user's loss function. We illustrate the methodsquot; with a detailed simulation example, and then we present an application to density forecasting ofquot;...

Since 1968, the Survey of Professional Forecasters has asked respondents to provide aquot; complete probability distribution of expected future inflation. We evaluate the adequacy ofquot; those density forecasts using the framework of Diebold, Gunther and Tay (1997). The analysisquot; reveals...

Density forecasting is increasingly more important and commonplace, forexample in financial risk management, yet little attention has been given to theevaluation of density forecasts. We develop a simple and operational frameworkfor density forecast evaluation. We illustrate the framework with...

Recent theoretical work has revealed a direct connection between asset return volatility forecastability and asset return sign forecastability. This suggests that the pervasive volatility forecastability in equity returns could, via induced sign forecastability, be used to produce...

This paper applies the asymmetric autoregressive conditional duration (AACD) model of Bauwens and Giot (2003) to estimate the probability of informed trading (PIN) using irregularly spaced transaction data. We model trade direction (buy versus sell orders) and the duration between trades...