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DTSTART:20210328T010000
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DTSTART;TZID=Europe/Helsinki:20211216T103000
DTEND;TZID=Europe/Helsinki:20211216T113000
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SUMMARY:Gaetan BAKALLI (GSEM\, Switzerland) "A Penalized two Pass Regression to Predict Stock Returns with Time-Varying Risk Premia"
DESCRIPTION:The Financial Econometrics Seminar: \nTime: 10:30 pm\nDate: 16th of December 2021\nRoom : 3001\n\n\nGaetan BAKALLI (GSEM\, Switzerland) “A Penalized two Pass Regression to Predict Stock Returns with Time-Varying Risk Premia” \nAbstract :We develop a penalized two-pass regression with time-varying factor loadings. The penalization in the first pass enforces sparsity for the time-variation drivers while also maintaining compatibility with the no-arbitrage restrictions by regularizing appropriate groups of coefficients. The second pass delivers risk premia estimates to predict equity excess returns. Our Monte Carlo results and our empirical results on a large cross-sectional data set of US individual stocks show that penalization without grouping can yield to nearly all estimated time-varying models violating the no-arbitrage restrictions. Moreover\, our results demonstrate that the proposed method reduces the prediction errors compared to a penalized approach without appropriate grouping or a time-invariant factor model. \n  \nOrganizers:\n\nJean-Michel ZAKOIAN  (CREST) \nSponsors:\nCREST \n\n
URL:https://crest.science/event/gaetan-bakalli-gsem-switzerland-t-b-a/
CATEGORIES:Finance-Insurance,Financial Econometrics
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