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A Test of the Efficiency of a Given Portfolio in High Dimensions

Chernov, Mikhail; Kelly, Bryan T.; Malamud, Semyon; … - National Bureau of Economic Research - 2025

We generalize the seminal Gibbons-Ross-Shanken test to the empirically relevant case where the number of test assets far exceeds the number of observations. In such a setting, one needs to use a regularized estimator of the covariance matrix of test assets, which leads to biases in the original...

Persistent link: https://www.econbiz.de/10015361441

A Specification Test for Speculative Bubbles

West, Kenneth D. - 1986

estimated in two ways. One may test for speculative bubbles, or fads, by testing whether the two estimates are the same. When … the test is applied to some annual U.S. stock market data, the data usually reject the null hypothesis of no bubbles. The …

Persistent link: https://www.econbiz.de/10012477002

Rational Finite Bubbles

Allen, Franklin - 1991

There has been a long-running debate about whether stock market prices are determined by fundamentals. To date no consensus has been reached. An important issue in this debate concerns the circumstances in which deviations from fundamentals are consistent with rational behavior. A...

Persistent link: https://www.econbiz.de/10012475283

Rational Asset Price Bubbles

Diba, Behzad T. - 1983

deterministic bubbles and stochastic bubbles, for a model of inflation and for a model of the evolution of price and quantity in the … market fora storable commodity, such as gold. The analysis focuses on stochastic bubbles as a possibility peculiarly … points to no compelling reason to rule out rational stochastic bubbles apriori, conventional behavioral assumptions imply …

Persistent link: https://www.econbiz.de/10012478044

Impulse Response Functions for Self-Exciting Nonlinear Models

Francis, Neville; Owyang, Michael T.; Soques, Daniel F. - National Bureau of Economic Research - 2023

We calculate impulse response functions from regime-switching models where the driving variable can respond to the shock. Two methods used to estimate the impulse responses in these models are generalized impulse response functions and local projections. Local projections depend on the observed...

Persistent link: https://www.econbiz.de/10014372466

Breaks in the Phillips Curve : Evidence from Panel Data

Smith, Simon C.; Timmermann, Allan; Wright, Jonathan H. - National Bureau of Economic Research - 2023

We revisit time-variation in the Phillips curve, applying new Bayesian panel methods with breakpoints to US and European Union disaggregate data. Our approach allows us to accurately estimate both the number and timing of breaks in the Phillips curve. It further allows us to determine the...

Persistent link: https://www.econbiz.de/10014250170

Selection-Neglect in the NFT Bubble

Huang, Dong; Goetzmann, William N. - National Bureau of Economic Research - 2023

Using transaction data from a large non-fungible token (NFT) trading platform, this paper examines how the behavioral bias of selection-neglect interacts with extrapolative beliefs, accelerating the boom and delaying the crash in the recent NFT bubble. We show that the price-volume relationship...

Persistent link: https://www.econbiz.de/10014322885

Public Debt Bubbles, Liquidity, and Risk : Policy Assessments Based on the Zero-Beta Interest Rate

Kocherlakota, Narayana Rao - National Bureau of Economic Research - 2025

This paper studies stationary equilibria in a novel class of analytically tractable incomplete markets models with a public debt bubble (meaning that the interest rate r̅ on riskfree government bonds is less than the growth rate). Within the models, the return rᴋ to physical capital can...

Persistent link: https://www.econbiz.de/10015421845

AI-Powered (Finance) Scholarship

Novy-Marx, Robert; Velikov, Mihail Z. - National Bureau of Economic Research - 2025

This paper describes a process for automatically generating academic finance papers using large language models (LLMs). It demonstrates the process' efficacy by producing hundreds of complete papers on stock return predictability, a topic particularly well-suited for our illustration. We first...

Persistent link: https://www.econbiz.de/10015195009

Monetary Policy and Rational Asset Price Bubbles

Galí, Jordi - 2013

I examine the impact of alternative monetary policy rules on a rational asset price bubble, through the lens of an overlapping generations model with nominal rigidities. A systematic increase in interest rates in response to a growing bubble is shown to enhance the fluctuations in the latter,...

Persistent link: https://www.econbiz.de/10012459855