Boussemart et al. (2009, 2010, 2018) propose to identify a global α-returns to scale that allows to minimise the inefficiency of the production set. This paper extends this notion to the concept of specific α-returns to scale. In such case, it is possible to identify the impact of each input...

As it is well-known, the centrepiece of model calibration is regularization which plays an important role in transforming an ill-posed calibration problem into a stable and well-formulated one. Empirically, this realm of research has not been explored in much details in the literature. The goal...

We compare three different approaches studied by past literature on data-driven inventory optimization--- Frequentist Parametric (FP), Bayesian Parametric (BP) and Nonparametric--- for the newsvendor problem. For the Parametric approaches, we allow for mis-specification of the demand model. We...

We consider learning in games that are misspecified in that players are unable to learn the true probability distribution over outcomes. Under misspecification, Bayes rule might not converge to the model that leads to actions with the highest objective payoff among the models subjectively...

As a complement to Hoover (2012), I argue that the “General Equilibrium” (in particular, “the disequilibrium theory”) and the “Aggregation” (i.e. large-scale models) microfoundational programs were in no way incompatible, while both opposed to New Classical Economics. In this regard,...

This empirical paper comprehensively sets out the impact of underspecification on a key foundational concept in empirical finance, the linear factor model. It places emphasis on the extensive consequences of factor omission for model estimation and interpretation. Factor omission in time-series...

This paper develops a general framework to study how misinterpreting information impacts learning. We consider sequential social learning and passive individual learning settings in which individuals observe signals and the actions of predecessors. Individuals have incorrect, or misspecified...

This paper aims at a critical assessment of the DSGE asset pricing approach. By employing partial indirect inference, we acknowledge that parts of a model are misspecified, while others retain the claim to capture economic reality, namely the ability to price assets traded in real markets....

We propose a dilution bias correction approach to deal with the errors-in-variables problem observed in realized volatility (RV) measures. The absolute difference between daily and monthly RV is shown to be proportional to the relative magnitude of the measurement error. Therefore, in...