Large Bayesian VARs are now widely used in empirical macroeconomics. One popular shrinkage prior in this setting is the natural conjugate prior as it facilitates posterior simulation and leads to a range of useful analytical results. This is, however, at the expense of modeling flexibility, as...

We develop tests for deciding whether a large cross‐section of asset prices obey an exact factor structure at the times of factor jumps. Such jump dependence is implied by standard linear factor models. Our inference is based on a panel of asset returns with asymptotically increasing...

This paper considers issues related to identification, inference, and computation in linearized dynamic stochastic general equilibrium (DSGE) models. We first provide a necessary and sufficient condition for the local identification of the structural parameters based on the (first and) second...

We propose generalized DWH specification tests which simultaneously compare three or more likelihood-based estimators in multivariate conditionally heteroskedastic dynamic regression models. Our tests are useful for Garch models and in many empirically relevant macro and finance applications...

We exploit the rationale behind the Expectation Maximization algorithm to derive simple to implement and interpret LM normality tests for the innovations of the latent variables in linear state space models against generalized hyperbolic alternatives, including symmetric and asymmetric Student...

We consider partial identification of finite mixture models in the presence of an observable source of variation in the mixture weights that leaves component distributions unchanged, as is the case in large classes of econometric models. We first show that when the number J of component...

The empirical regularity known as Zipf’s law or the rank-size rule has motivated development of a theoretical literature to explain it. We examine the assumptions on consumer behavior, particularly about their inability to insure against the city-level productivity shocks, implicitly used in...

Prediction markets for future events are increasingly common and they often trade several contracts for the same event. This paper considers the distribution of a normative risk-neutral trader who, given any portfolio of contracts traded on the event, would choose not to reallocate that...