I propose an exact finite sample test of the risk reduction of the global minimum variance (GMV) portfolio. The GMV test statistic is proportional to the reduction in the variance of the GMV portfolio and has a straightforward geometric and portfolio interpretation and complements the celebrated...

We study a nonlinear relationship between corporate investment and Tobin’s q in the cross-section. After correcting for nonseparable measurement error in q with the aid of repeated measurement, we find evidence of heterogeneity in the investment-q relation. The investment-q sensitivity is...

This paper introduces non-linear dimension reduction in factor-augmented vector autoregressions to analyze the effects of different economic shocks. We argue that controlling for non-linearities between a large-dimensional dataset and the latent factors is particularly useful during turbulent...

The low-frequency movements of many economic variables play a prominent role in policy analysis and decision-making. We develop a robust estimation approach for these slow-moving trend processes, which is guided by a judicious choice of priors and is characterized by sparsity. We present some...

Banks calculating capital requirements for credit risk based on internal ratings according to the Basel framework must add a margin of conservatism to their estimates of probability of default (PD). This margin shall, at a minimum, cover the statistical uncertainty related to the estimation. A...

This primer offers a hands-on accessible guide to writing and estimating structural models. We review commonly-used methodologies, including dynamic programming, maximum likelihood, generalized and simulated method of moments, conditional choice probabilities as well as tools to compute standard...

Analyzing observational data from multiple sources can be useful for increasing statistical power to detect a treatment effect; however, practical constraints such as privacy considerations may restrict individual-level information sharing across data sets. This paper develops federated methods...