In the paper a realized regression version of the Britten-Jones (1999) portfolio selection approach is proposed, yielding a conditional mean-variance efficient portfolio selection strategy. Application to euro area stock markets diversification, differently from other standard approaches,...

What explains the cross section of expected returns for the 25 size/value Fama-French portfolios? It is found that modelling time-varying betas is important to explain the cross-section of expected returns, as well as to comply with the time series restriction on Jensen-alpha. Support for a...

A strategy for estimating, filtering and forecasting time-varying factor betas is proposed. The approach is based on the multivariate realized regression principle, an omnibus noise filter and an adaptive long memory forecasting model. While the multivariate realized regression approach allows...

We estimate FIGARCH models with data sets of daily and thirty minute returns on the Deutsche mark-US dollar exchange rate. The results point to the importance of accurately modelling the persistence properties of volatility in terms of structural breaks and long memory, and controlling for...

What are the causes of exchange rate volatility? When second moments implications of theories of exchange rates determination are considered, long-term fundamental linkages between macroeconomic and exchange rate volatility can be envisaged. Moreover, as the exchange rate is an important...

This paper introduces a new long memory volatility process, denoted by Adaptive FIGARCH, or A-FIGARCH, which is designed to account for both long memory and structural change in the conditional variance process. Structural change is modeled by allowing the intercept to follow a smooth...

In this paper international comovements among a set of key real and nominal macroeconomic variables for the G-7 countries have been investigated for the 1980-2005 period, using a Factor Vector Autoregressive approach. We present evidence that comovements in macroeconomic variables do not concern...

This study contributes to the investigation of the macro- finance interface by assessing the economic content and risk based interpretation of widely employed risk factors in the specifi cation of empirical asset pricing models, i.e., Fama-French size and value, and Carhart momentum factors, as...