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SUMMARY:Measuring the "Dark Matter" in Asset Pricing Models
DTSTART:20141024T103000
DTEND:20141024T120000
DTSTAMP:20260510T020850Z
UID:16817ac09a8ef5e37143e859233c6b670c41c159fbb60c4ebcbd4692
CATEGORIES:Conferences - Seminars
DESCRIPTION:Hui CHEN (MIT)\nModels of rational expectations endow agents w
 ith precise knowledge of the probability laws inside the models. This assu
 mption becomes more tenuous when a model's performance is highly sensitive
  to the parameters that are difficult to estimate directly\, i.e.\, when a
  model relies on "dark matter." We propose new measures of model fragility
  by quantifying the informational burden that a rational expectations mode
 l places on the agents. By measuring the informativeness of the cross-equa
 tion restrictions implied by a model\, our measures can systematically det
 ect the direction in the parameter space in which the model's performance 
 is the most fragile. Our methodology provides new ways to conduct sensitiv
 ity analysis on quantitative models. It helps identify situations where pa
 rameter or model uncertainty cannot be ignored. It also helps with evaluat
 ing competing classes of models that try to explain the same set of empiri
 cal phenomena from the perspective of the robustness of their implications
 .
LOCATION:UNIL\, Extranef\, room 126 https://planete.unil.ch/plan/?local=EX
 T-126
STATUS:CONFIRMED
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