The study shows critical roles of firm-specific information on herd behavior, which is underexplored in prior literature, albeit an increasing impact of firm-specific information on asset pricing. The main finding demonstrates that three of four selected measures of firm-specific information...

The behavior of market participants often does not rely on market signals, but replicates the investment decisions of other parties. The convergence of their investment behavior leads to the emergence of herd behavior with negative implications for financial stability. Moreover, this phenomenon...

This paper establishes a selection of stylized facts for high-frequency cointegrated processes, based on one-minute-binned transaction data. A methodology is introduced to simulate cointegrated stock pairs, following none, some or all of these stylized facts. AR(1)-GARCH(1,1) and...

Nowadays, modeling and forecasting the volatility of stock markets have become central to the practice of risk management; they have become one of the major topics in financial econometrics and they are principally and continuously used in the pricing of financial assets and the Value at Risk,...

This paper develops a method to select the threshold in threshold-based jump detection methods. The method is motivated by an analysis of threshold-based jump detection methods in the context of jump-diffusion models. We show that over the range of sampling frequencies a researcher is most...

In this paper we consider the problem of an insurance company where the wealth of the insurer is described by a Cramér-Lundberg process. The insurer is allowed to invest in a risky asset with stochastic volatility subject to the influence of an economic factor and the remaining surplus in a...

We develop tests for deciding whether a large cross-section of asset prices obey an exact factor structure at the times of factor jumps. Such jump dependence is implied by standard linear factor models. Our inference is based on a panel of asset returns with asymptotically increasing...

Indirect Inference (I-I) estimation of structural parameters θ requires matching observed and simulated statistics, which are most often generated using an auxiliary model that depends on instrumental parameters Ø. The estimators of the instrumental parameters will encapsulate the...

Gaussian affine term structure models attribute time-varying bond risk premia to changing risk prices driven by the conditional means of the risk factors, while structural models with recursive preferences credit it to stochastic volatility. We reconcile these competing channels by introducing a...

This paper studies the joint dynamics of U.S. inflation and a term structure of average inflation predictions taken from the Survey of Professional Forecasters (SPF). We estimate these joint dynamics by combining an unobserved components (UC) model of inflation and a sticky-information forecast...