We provide evidence on two alternative mechanisms of interaction between returns and volatilities: the leverage ef fect and the volatility feedback effect. We stress the importance of distinguishing between realized volatility and implied volatility and find that implied volatilities are...

Abstract Copulas are widely used for modeling the dependence structure of multivariate data. Many methods for estimating the copula density functions are investigated. In this paper, we study the asymptotic properties of the Bernstein estimator for unbounded copula density functions. We show...

We propose a nonparametric estimation and inference for conditional density based Granger causality measures that quantify linear and nonlinear Granger causalities. We first show how to write the causality measures in terms of copula densities. Thereafter, we suggest consistent estimators for...

We model portfolio weights as a function of latent factors that summarize the information in a large number of economic variables. This approach (hereafter diffusion index approach) offers the opportunity to exploit a much richer information base to improve portfolio selection. We use factor...

We study risk assessment using an optimal portfolio in which the weights are functions of latent factors and firm-specific characteristics (hereafter, diffusion index portfolio). The factors are used to summarize the information contained in a large set of economic data and thus reflect the...