This paper considers the problem of model uncertainty in the case of multi-asset volatility models and discusses the use of model averaging techniques as a way of dealing with the risk of inadvertently using false models in portfolio management. Evaluation of volatility models is then considered...

We introduce a novel estimator for the number of common dynamic shocks for large dynamicfactor models. The noticeable feature of our estimator is that it can be applied to single frequencies as well as to given frequency bands, making it extremely suited to disentangle the shocks a acting the...

Our objective is to develop a methodology to price the cross section of asset returns. Despite the hundreds of systematic risk factors considered in the literature (``factor zoo''), there is still a sizable pricing error. We show that what is missing in asset-pricing factor models is not...

We provide a short and selected review of the vast literature on cross-section predictability. We focus on the state of art methods used to forecast the cross-section of stock returns with major predictors and are primarily interested in the ideas, methods, and their applications. To understand...

We develop a normative theory for constructing mean-variance portfolios robust to model misspecification. We identify two inefficient portfolios---an "alpha'' portfolio, representing latent asset demand, that depends only on pricing errors and a "beta'' portfolio that depends on factor risk...