This paper proposes an empirical Bayes approach for Markov switching autoregressions that can constrain some of the state-dependent parameters (regression coefficients and error variances) to be approximately equal across regimes. By flexibly reducing the dimension of the parameter space, this can help to ensure regime separation and to detect the Markov switching nature of the data. The permut...

We propose a Vuong (1989)-type model selection test for models defined by conditional moment restrictions. The moment restrictions can be standard equality restrictions that point identify the model parameters, or moment equality or inequality restrictions that partially identify the model parameters. The test uses a new average generalized empirical likelihood criterion function designed to in...

We propose a new test for superior predictive ability. The new test compares favorable to the reality check for data snooping (RC), because the former is more powerful and less sensitive to poor and irrelevant alternatives. The improvements are achieved by two modifications of the RC. We employ a studentized test statistic that reduces the influence of erratic forecasts and we invoke a sample d...

Empirical tests of the arbitrage pricing theory using measured variables rely on the accuracy of standard inferential theory in approximating the distribution of the estimated risk premiums and factor betas. The techniques employed thus far perform factor selection and model inference sequentially. Recent advances in Bayesian variable selection are adapted to an approximate factor model to inve...

The study of the asymmetric behavior of macroeconomic variables over the business cycles phases has had a long tradition in economics. In this work we find evidence in favor of the hypothesis of having a STAR-type nonlinear asymmetric behavior of the economic activity, over the last two decades, in three Latin American countries: Brazil, Colombia, and Mexico. For Chile and Venezuela the null hy...

This paper presents analytical, Monte Carlo, and empirical evidence linking insample tests of predictive content and out-of-sample forecast accuracy. Our approach focuses on the negative effect that finite-sample estimation error has on forecast accuracy despite the presence of significant population-level predictive content. Specifically, we derive simple-to-use in-sample tests that test not o...

This paper surveys recent developments in the evaluation of point forecasts. Taking West’s (2006) survey as a starting point, we brie‡y cover the state of the literature as of the time of West’s writing. We then focus on recent developments, including advancements in the evaluation of forecasts at the population level (based on true, unknown model coe¢ cients), the evaluation of forecasts in th...

There is growing interest in discrete-choice experiments (DCE) as a method to elicit consumers' preferences in the health care sector. Increasingly this method is used to determine willingness-to-pay (WTP) for health-related goods. However, its external validity in the health care domain has not been investigated until today. This paper examines the external validity of DCE concerning the reduc...

Using high-frequency stock market data and (synthetic) variance swap rates, this paper identifies and investigates the temporal variation in the market variance risk premium. The variance risk is manifest in two salient features of financial returns: stochastic volatility and jumps. The pricing of these two separate components is analyzed in a general semiparametric framework. The key empirical...

This paper investigates the determinants of Polish small firm’s intentions to expand production in the context of possible economic expansion on accession to the EU. Using a non-linear specification a model is developed using twenty-seven explanatory variables derived from a questionnaire given to Polish small firms in late 1999 asking about their motivations in expanding production. Seven of t...