GARCH volatility models with fixed parameters are too restrictive for long time series due to breaks in the volatility process. Flexible alternatives are Markov-switching GARCH and change-point GARCH models. They require estimation by MCMC methods due to the path dependence problem. An unsolved...

This paper studies the implications for international portfolio diversification of a simple OLG model of the world economy with transaction costs. Our main result shows that the introduction of very small transaction costs is sufficient to reproduce the large home bias observed in the...