Option prices provide valuable information on market expectations. This paper attempts to extract market expectations, as conveyed by an implied risk-neutral probability distribution, from option prices for the dollar-euro exchange rate. Returns' volatilities are inferred from observed and...

Using the ARFIMA-FIGARCH model, this paper studies the efficiency of the Japanese equity market by examining the statistical properties of the return and volatility of the Nikkei 225. It shows that both follow a long range dependence, which stands against the efficient market hypothesis (EMH)....

We develop a new methodology to estimate the importance of herd behavior in financial markets: we build a structural model of informational herding that can be estimated with financial transaction data. In the model, rational herding arises because of information-event uncertainty. We estimate...

This paper examines whether deviations from PPP are stationary in the presence of nonlinearity, and whether the adjustment toward PPP is symmetric from above and below. Using alternative nonlinear models, our results support mean reversion and asymmetric adjustment dynamics. We find differences...

We propose a model of the interbank money market with an explicit role for central bank intervention and periodic reserve requirements, and study the interaction of profit-maximizing banks with a central bank targeting interest rates at high frequency. The model yields predictions on biweekly...

The World Economic Outlook (WEO) is a key source of forecasts of global economic conditions. It is therefore important to review the performance of these forecasts against both actual outcomes and alternative forecasts. This paper conducts a series of statistical tests to evaluate the quality of...

This paper evaluates the performance of Consensus Forecasts of GDP growth for industrialized and developing countries from 1989 to 1998. The questions addressed are (1) How do forecast errors differ across industrialized and developing countries? (2) How well do forecasters predict recessions?...

Using realized volatility to estimate conditional variance of financial returns, we compare forecasts of volatility from linear GARCH models with asymmetric ones. We consider horizons extending to 30 days. Forecasts are compared using three different evaluation tests. With data from an equity...

One approach to oil markets is to treat oil as an asset, besides its role as a commodity. Speculative and nonspeculative activity by investors in the derivatives markets could be responsible for a sizable increase in oil prices. This paper recognizes both the consumption and investment aspects...

We document information rigidity in forecasts for real GDP growth in 46 countries over the past two decades. We investigate: (i) if rigidities are lower around turning points in the economy, such as in times of recessions and crises; (ii) if rigidities differ across countries, particularly...