In this paper, the effects of oil and gold prices on stock market index are investigated. We use a cointegrated vector autoregressive Markov-switching model to examine the nonlinear properties of these three variables during the period of January 2003 - December 2014. The Markov-switching vector-equilibrium-correction model with three regimes representing "deep recession", "mild recession" and ...

This study investigated three issues regarding process interventions in group decision making: (1) how process interventions affect group decision making processes and outcomes; (2) how persistent these effects are, and (3) how the timing (earlier vs. later) and type (directive vs. participative) of process intervention moderate these effects. The key finding was that process interventions had ...

Multivariate models of asset returns are very important in financial applications. Asset allocation, risk assessment and construction of an optimal portfolio require estimates of the covariance matrix between the returns of assets (see e.g. Aguilar and West (2000), Pajor (2005a, 2005b)). Similarly, hedges require a covariance matrix of all the assets in the hedge. There are two main types of vo...

This paper studies consumption and savings dynamics, asset returns, and welfare losses in three macroeconomic models with information processing constraints which is also called “rational inattention” (henceforth, RI) in Sims (2003). The first model is a standard Linear Quadratic Gaussian (henceforth, LQG) permanent income (henceforth, PIH) model. We show that incorporating RI can better explai...

We propose a method to identify common persistent components in a k-dimensional time series. Assuming that the individual series of the vector process have long-range dependence, we apply canonical correlation analysis to the series and its lagged values. A zero canonical correlation implies the existence of a short-memory linear combination, hence the existence of common long-range dependence;...

I propose a new measure of common, time-varying tail risk for large cross sections of stock returns. Stock return tails are described by a power law in which the power law exponent is allowed to transition smoothly through time as a function of recent data. It is motivated by asset pricing theory and is estimable via quasi-maximum likelihood. Estimates indicate substantial time variation in sto...

The study of the joint dynamic behavior between stock market returns and real economic growth rates is an important empirical question in finance and macroeconomics. This paper investigates their linkage by proposing a vector autoregressive infinite hidden Markov model. Our model has two advantages over the existing approaches in the literatures. In contrast to Markov switching models with fixe...

The present study explores the effect of the gambler’s fallacy on stock trading volumes. I hypothesize that if a stock’s price rises (falls) during a number of consecutive trading days, then the gambler’s fallacy may cause at least some of the investors to expect that the stock’s price “has” to subsequently fall (rise), and thus, to increase their willingness to sell (buy) the stock, resulting ...