Predicting Long-term Financial Returns: VAR vs. DSGE Model – A Horse-Race

Détails

ID Serval
serval:BIB_CA675FAB9C48
Type
Article: article d'un périodique ou d'un magazine.
Collection
Publications
Titre
Predicting Long-term Financial Returns: VAR vs. DSGE Model – A Horse-Race
Périodique
Journal of Money, Credit, and Banking
Auteur(s)
Jondeau E., Rockinger M.
Statut éditorial
In Press
Peer-reviewed
Oui
Langue
anglais
Résumé
This paper considers a U.S. institutional investor who is implementing a long-term portfolio allocation using forecasts of financial returns. We compare the predictive performance of two competing macro-finance models ---an unrestricted Vector AutoRegression (VAR) and a fully-structural Dynamic Stochastic General Equilibrium (DSGE) model--- for horizons up to 15 years. Although the performances are similar for short horizons, the DSGE model outperforms the VAR at forecasting financial returns in the long term. This model also generates substantially higher Sharpe ratios. Although it contains fewer unknown parameters, it benefits from economically grounded restrictions that help anchor financial returns in the long term.
Création de la notice
18/03/2019 16:26
Dernière modification de la notice
21/08/2019 6:14
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