Flexible Time-Varying Betas in a Novel Mixture Innovation Factor Model with Latent Threshold
نویسندگان
چکیده
This paper introduces a new methodology to estimate time-varying alphas and betas in conditional factor models, which allows substantial flexibility framework. To circumvent problems associated with the previous approaches, we introduce Bayesian parameter model where innovations of state equation have spike-and-slab mixture distribution. The distribution specifies two states specific probability. In first state, innovation variance is set close zero certain probability parameters stay relatively constant. second large change normally distributed mean given variance. latent specified threshold that governs change. We allow separate for each parameter; thus, may shift an unsynchronized manner such moves from one another when exceeds vice versa. approach offers great nests plethora other specifications, allowing us assess whether models evolve gradually over time or display infrequent, but large, shifts. apply proposed industry portfolios within five-factor setting show Capital Asset Pricing Model (CAPM) provides robust beta estimates coupled smaller pricing errors compared alternative approaches. results significant implications implementation smart strategies rely heavily on accuracy stability yields.
منابع مشابه
A threshold model for time varying copulas
We develop threshold models that allow copula functions or their association parameters changing across time. The number and location of thresholds is assumed unknown. We use a Markov chain Monte Carlo strategy combined with Laplace estimates that evaluate the required marginal densities for a given model. We apply our methodology to financial time series emphasizing the ability to improve esti...
متن کاملA Multivariate Threshold GARCH Model with Time-varying Correlations
In this article, a Multivariate Threshold Generalized Autoregressive Conditional Heteroscedasticity model with time-varying correlation (VC-MTGARCH) is proposed. The model extends the idea of Engle (2002) and Tse & Tsui (2002) in a threshold framework. This model retains the interpretation of the univariate threshold GARCH model and allows for dynamic conditional correlations. Extension of Boll...
متن کاملA Multi-objective optimization model for project scheduling with time-varying resource requirements and capacities
Proper and realistic scheduling is an important factor of success for every project. In reality, project scheduling often involves several objectives that must be realized simultaneously, and faces numerous uncertainties that may undermine the integrity of the devised schedule. Thus, the manner of dealing with such uncertainties is of particular importance for effective planning. A realistic sc...
متن کاملA latent factor model with a mixture of sparse and dense factors to model gene expression data with confounding effects
factors to model gene expression data with confounding effects Chuan Gao, Christopher D Brown, Barbara E Engelhardt1,3,∗ 1 Institute for Genome Sciences & Policy, Duke University, Durham, NC, USA 2 Department of Genetics, University of Pennsylvania, Philadelphia, PA, USA 3 Department of Biostatistics & Bioinformatics and Department of Statistical Science, Duke University, Durham, NC, USA ∗ E-ma...
متن کاملDevelopment of a novel lot sizing model with variable lead time in supply chain environment
Supply chain management (SCM) addresses the management of materials and information across the entire chain from suppliers to producers, distributors, retailers, and customer. The theory of supply chain management suggests that lead time reduction is a pioneer to the use of market mediation to reduce transaction uncertainty in the chain, which can be conceptualized as the primary goal of supply...
متن کاملذخیره در منابع من
با ذخیره ی این منبع در منابع من، دسترسی به آن را برای استفاده های بعدی آسان تر کنید
ژورنال
عنوان ژورنال: Mathematics
سال: 2021
ISSN: ['2227-7390']
DOI: https://doi.org/10.3390/math9080915