Lars Hansen started alongside the latest inwards the Hansen-Sargent ambiguity / robustness function ,Sets of Models together with Prices of Uncertainty. Stavros Panageas gave a beautiful word , complete alongside powerfulness quest animations. He characterized the newspaper every bit a major advance , for reducing the attain of models over which an ambiguous agent looks for the worst representative scenario , together with for making that attain state-dependent.
In the application , the agent worries that the hateful increment charge per unit of measurement of consumption together with the AR(1) coefficient mightiness hold upwardly wrong; a to a greater extent than persistent consumption increment procedure is hurtful , together with that hurting is to a greater extent than inwards bad times.
I haven't followed this function closely enough. I nonetheless wonder what the testable implcations are -- how dissimilar is the property pricing model from 1 inwards which the truthful consumption increment procedure is simply a flake dissimilar from our gauge , inwards the worst possible way?
Still , it's dainty to reckon a Nobel Prize winner leading off a conference , together with alongside easily the most technical newspaper at that conference , alongside approximately other 1 (Rob Engle) inwards the audience. That tells yous something virtually the seriousness of this group. Also , this is serious behavioral finance past times whatever metric -- a disciplined model of probability misperceptions , which is dainty to see.
Robert Novy-Marx presented Testing Strategies Based on Multiple Signals , discussed past times Moto Yogo. We're all familiar alongside the phenomenon that if yous attempt 10 characteristics together with alternative the best few to forecast returns , t statistics are biased together with surgery falls out of sample.
Robert pointed out that if yous position those best 3 inwards a portfolio , they diversify each other , reducing the in-sample variance of the portfolio , together with boosting Sharpe ratios together with t-statistics fifty-fifty further.
Many ``smart beta'' funds are doing this , thence the fall-off inwards surgery from backtest to existent coin is relevant beyond academia.
The extent of this bias is impressive. Here is the distribution of t statistics that results when yous alternative the best 3 of xx completely useless signals , together with position them inwards a portfolio. Critical values of iv together with five demonstrate upwardly routinely inwards Robert's calculations.
Laura Veldkamp presented her function alongside Nina Boyarchenko , David Lucca , together with Laura Veldkamp , Taking Orders together with Taking Notes: Dealer Information Sharing inwards Financial Markets. Discussed ably (of course) past times Darrell Duffie. Is it a employment that the dealers who are the prime number bidders at treasury auctions accept been caught talking to each other ahead of the auction? Surprisingly , no: The Treasury tin come upwardly out ahead when dealers part information alongside each other , together with investors tin potentially come upwardly out ahead too.
This warms my contrarian economist heart. We know thence petty virtually how markets function , together with regulators are thence quick to jump on supposedly bad behavor , it's lovely to reckon a clear together with convincing model , that explains the sort of second-order together with equilibrium effects that economists are adept at.
Brian Weller presented Measuring Tail Risks at High Frequency , discussed nicely past times Mike Chernov. Brian's basic thought is to run cross-sectional regressions of bid/ask spreads , normalized past times book together with depth , on the cross-section of factor betas. Since spreads are larger when dealers are to a greater extent than worried virtually large jumps , this produces a mensurate of time-varying probability x size of such jumps. The mensurate correlates good alongside the VIX.
Michael Bauer presented his newspaper alongside Jim Hamilton Robust Bond Risk Premia discussed real nicely past times Greg Duffee. (My discussion of a previous presentation). This newspaper is genuinely virtually whether macro variables aid to forecast bond returns. We're used to "Stambaugh bias:'' if yous forecast returns alongside a persistent regressor , together with the conception inwards the regressor is strongly negatively correlated alongside the conception inwards the provide , thence the near-unit-root downward bias inwards the regressor autocorrelation seeps over into upward bias of provide predictability. But macro variables forecasting bond returns accept innovations nearly uncorrelated alongside the returns , thence that's non much of a problem. Michael together with Jim demonstrate approximately other problem: alongside overlappping returns , t statistics tin hold upwardly biased downwards too.
This led to a pleasant reassessment of bond provide forecasts. Some points that came up: econometrics aside , many provide forecasters don't make good out of sample. Many of the issues are specification issues orthogonal to this econometric point. For representative , evaluating the huge forecastability of bond returns from a combination of grade together with inflation documented past times Anna Cieslak together with Pavol Povala , where the forecasters expression a lot similar a tendency , is genuinely virtually specification together with interpretation , non econometrics. I held out the sentiment that the of import business office of my newspaper alongside Monika Piazzesi is the single-factor construction of expected returns , non whether pocket-size chief components aid to forecast returns. We had a pleasant interchange on whether it's a adept or terrible thought to run one-year horizon forecasting regressions. I similar them , because they attenuate measure error. Raising a weekly autoregression to the 52nd powerfulness yields junk. Greg likes them , together with gave a stirring reminder of Bob Hodrick's quest that yous tin include lags of the forecasting variables instead.
Nick Roussanov presented his newspaper alongside Erik Gilje together with Robert Ready , Fracking , Drilling , together with Asset Pricing: Estimating the Economic Benefits of the Shale Revolution with Wei Xiong discussing. They runway the reaction of stock prices to the shale crude oil boom. In item , they showed that stocks which rose on a huge shale statement later on rose fifty-fifty to a greater extent than every bit to a greater extent than adept shale word came in. Until , every bit Wei pointed out , prices collapsed.
Nick also used stock marketplace value to attempt to instruct at an gauge of the economic science benefits of fracking. It's a worthy endeavor , but let's retrieve the difficulties. In a competitive no-adjustment cost globe , profits are null together with at that spot are no abnormal stock returns. Stock capitalization may rising , every bit firms number stock to invest. But that measures the value of majuscule invested , non the consumer surplus of shale. Still , the full general thought of mixing property pricing , liberate energy economic science , together with making economical measurements from stock prices is intriguing.
Jonathan Sokobin , Chief Economist , FINRA presented "An Overview of FINRA Data" which I alas had to miss. I'm delighted anyone from the authorities wants us to role their data!
The AP coming together has a dainty tradition. Usually the most dull business office of a conference is the author's response to discussant. The AP meetings make away alongside this -- or rather , the writer tin reply if individual inwards the audience raises his or her mitt together with says "I'd similar to listen your response to x." That genuinely happened! But past times together with large the AP meetings save fourth dimension together with a tradition of real active participation together with word , together with this 1 was no different.
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