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Author:Berkowitz, Jeremy 

Working Paper
Dynamic equilibrium economies: a framework for comparing models and data

The authors propose a constructive, multivariate framework for assessing agreement between (generally misspecified) dynamic equilibrium models and data, which enables a complete second-order comparison of the dynamic properties of models and data. They use bootstrap algorithms to evaluate the significance of deviations between models and data, and they use goodness-of-fit criteria to produce estimators that optimize economically relevant loss functions. The authors provide a detailed illustrative application to modeling the U.S. cattle cycle.
Working Papers , Paper 97-7

Working Paper
Generalized Spectral Estimation

This paper provides a famework for estimating parameters in a wide class of dynamic rational expectations models. The framework recognizes that RE models are often meant to match the data only in limited ways. In particular, interest may focus on a subset of frequencies. This paper designs a frequency domain version of GMM. The estimator has several advantages over traditional GMM. Aside from allowing band-restricted estimation, it does not require making arbitrary instrument or weighting matrix choices. The framework also includes least squares, maximum likelihood, and band restricted ...
Finance and Economics Discussion Series , Paper 1996-37

Working Paper
Long-Horizon Exchange Rate Predictability?

Several authors have recently investigated the predictability of exchange rates by fitting a sequence of long-horizon error-correction regressions. We show that such a procedure gives rise to spurious evidence of predictive power. A simulation study demonstrates that even when using this technique on two independent series, estimates and diagnostic statistics suggest a high degree of predictability of the dependent variable. We apply a simple modification of the long-horizon regression due to Jegadeesh (1991), which may provide more accurate inferences for researchers interested in comparing ...
Finance and Economics Discussion Series , Paper 1996-39

Working Paper
Recent Developments in Bootstrapping Time Series

In recent years, several new parametric and nonparametric bootstrap methods have been proposed for time series data. Which of these methods should applied researchers use? We provide evidence that for many applications in time series econometrics parametric methods are more accurate, and we identify directions for future research on improving nonparametric methods. We explicitly address the important, but often neglected issue of model selection in bootstrapping. In particular, we emphasize the advantages of the AIC over other lag order selection criteria and the need to account for lag order ...
Finance and Economics Discussion Series , Paper 1996-45

Conference Paper
The effect of personal bankruptcy law on small firms' access to credit

Proceedings , Paper 779

Working Paper
Generalized spectral estimation

This paper provides a framework for estimating parameters in a wide class of dynamic rational expectations models. The framework recognizes that RE models are often meant to match the data only in limited ways. In particular, interest may focus on a subset of frequencies. This paper designs a frequency domain version of GMM. The estimator has several advantages over traditional GMM. Aside from allowing band-restricted estimation, it does not require making arbitrary instrument or weighting matrix choices. The framework also includes least squares, maximum likelihood, and band restricted ...
Finance and Economics Discussion Series , Paper 96-37

Working Paper
Dealer polling in the presence of possibly noisy reporting

The value of a vast array of financial assets are functions of rates or prices determined in OTC, interbank, or other off-exchange markets. In order to price such derivative assets, underlying rate and price indexes are routinely sampled and estimated. To guard against misreporting, whether unintentional or for market manipulation, many standard contracts utilize a technique known as trimmed-means. This paper points out that this polling problem falls within the statistical framework of robust estimation. Intuitive criteria for choosing among robust valuation procedures are discussed. In ...
Finance and Economics Discussion Series , Paper 1998-33

Working Paper
How accurate are Value-at-Risk models at commercial banks?

In recent years, the trading accounts at large commercial banks have grown substantially and become progressively more diverse and complex. We provide descriptive statistics on the trading revenues from such activities and on the associated Value-at-Risk forecasts internally estimated by banks. For a sample of large bank holding companies, we evaluate the performance of banks' trading risk models by examining the statistical accuracy of the VaR forecasts. Although a substantial literature has examined the statistical and economic meaning of Value-at-Risk models, this article is the first to ...
Finance and Economics Discussion Series , Paper 2001-31

Working Paper
Dynamic equilibrium economies: a framework for comparing models and data

We propose a constructive, multivariate framework for assessing agreement between (generally misspecified) dynamic equilibrium models and data, which enables a complete second-order comparison of the dynamic properties of models and data. We use bootstrap algorithms to evaluate the significance of deviations between models and data, and we use goodness-of-fit criteria to produce estimators that optimize economically relevant loss functions. We provide a detailed illustrative application to modeling the U.S. cattle cycle.
Finance and Economics Discussion Series , Paper 1997-23

Working Paper
A coherent framework for stress-testing

In recent months and years both practitioners and regulators have embraced the ideal of supplementing VaR estimates with "stress-testing". Risk managers are beginning to place an emphasis and expend resources on developing more and better stress-tests. In the present paper, we hold the standard approach to stress-testing up to a critical light. The current practice is to stress-test outside the basic risk model. Such an approach yields two sets of forecasts -- one from the stress-tests and one from the basic model. The stress scenarios, conducted outside the model, are never explicitly ...
Finance and Economics Discussion Series , Paper 1999-29

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