Jon Faust
Biographic Data
| ID | 5867333 |
|---|---|
| NAME | Jon Faust |
| GIVEN NAMES | Jon |
| FAMILY NAME | Faust |
| SIGNATURE | FAUST J |
| AFFILIATIONS | Federal Reserve |
| VERIFIED | No |
| TOTAL WORKS | 6 |
| TOTAL CITATIONS | 3 |
| AUTHOR COUNT | 6 |
| EDITOR COUNT | 0 |
| FIRST PUBLICATION YEAR | 1997 |
| LATEST PUBLICATION YEAR | 2013 |
| H-INDEX | 1 |
Credit Spreads as Predictors of Real-Time Economic Activity: A Bayesian Model-Averaging Approach
Employing a large number of financial indicators, we use Bayesian model averaging (BMA) to forecast real-time measures of economic activity. The indicators include credit spreads based on portfolios, constructed directly from the secondary market prices of outstanding bonds, sorted by maturity and credit risk. Relative to an autoregressive benchmark, BMA yields consistent improvements in the prediction of the cyclically sensitive measures of econ…
Efficient Prediction of Excess Returns
It is well known that augmenting a standard linear regression model with variables that are correlated with the error term but uncorrelated with the original regressors will increase the asymptotic efficiency of the original coefficients. We argue that in the context of predicting excess returns, valid augmenting variables exist and are likely to yield substantial gains in estimation efficiency and, hence, predictive accuracy. The proposed augmen…
Comparing Greenbook and Reduced Form Forecasts Using a Large Realtime Dataset
Many recent articles have found that atheoretical forecasting methods using many predictors give better predictions for key macroeconomic variables than various small-model methods. The practical relevance of these results is open to question, however, because these articles generally use ex post revised data not available to forecasters and because no comparison is made to best actual practice. We provide some evidence on both of these points us…
Breaks in the Variability and Comovement of G-7 Economic Growth
This paper investigates breaks in the variability and comovement of output, consumption, and investment in the G-7 economies. In contrast with most other papers on comovement, we test for changes in comovement, allowing for breaks in mean and variance. Despite claims that rising integration among these economies has increased output correlations among them, we find no clear evidence of an increase in correlation of growth rates of output, consump…
When Do Long-Run Identifying Restrictions Give Reliable Results
Many recent articles have identified behavioral disturbances in vector autoregressions by imposing restrictions on the long-run effects of shocks. This article demonstrates that this approach will be unreliable unless the underlying economy satisfies three types of strong restrictions. Although many aspects of these issues have been raised before, this article draws out and illustrates the implications for inferences under the long-run scheme. Fu…
Options, Sunspots, and the Creation of Uncertainty
The authors present two examples in which the addition of an option market leads to sunspot equilibria despite the fact that no sunspot equilibria exist without the market. These examples highlight limitations in two prevalent views of option markets. It is often assumed that option markets help complete otherwise incomplete markets. The authors demonstrate that they can instead increase the number of events agents wish to insure against. As in F…
Options, Sunspots, and the Creation of Uncertainty
The authors present two examples in which the addition of an option market leads to sunspot equilibria despite the fact that no sunspot equilibria exist without the market. These examples highlight limitations in two prevalent views of option markets. It is often assumed that option markets help complete otherwise incomplete markets. The authors demonstrate that they can instead increase the number of events agents wish to insure against. As in F…
When Do Long-Run Identifying Restrictions Give Reliable Results
Many recent articles have identified behavioral disturbances in vector autoregressions by imposing restrictions on the long-run effects of shocks. This article demonstrates that this approach will be unreliable unless the underlying economy satisfies three types of strong restrictions. Although many aspects of these issues have been raised before, this article draws out and illustrates the implications for inferences under the long-run scheme. Fu…
Options, Sunspots, and the Creation of Uncertainty
The authors present two examples in which the addition of an option market leads to sunspot equilibria despite the fact that no sunspot equilibria exist without the market. These examples highlight limitations in two prevalent views of option markets. It is often assumed that option markets help complete otherwise incomplete markets. The authors demonstrate that they can instead increase the number of events agents wish to insure against. As in F…
Breaks in the Variability and Comovement of G-7 Economic Growth
This paper investigates breaks in the variability and comovement of output, consumption, and investment in the G-7 economies. In contrast with most other papers on comovement, we test for changes in comovement, allowing for breaks in mean and variance. Despite claims that rising integration among these economies has increased output correlations among them, we find no clear evidence of an increase in correlation of growth rates of output, consump…
Comparing Greenbook and Reduced Form Forecasts Using a Large Realtime Dataset
Many recent articles have found that atheoretical forecasting methods using many predictors give better predictions for key macroeconomic variables than various small-model methods. The practical relevance of these results is open to question, however, because these articles generally use ex post revised data not available to forecasters and because no comparison is made to best actual practice. We provide some evidence on both of these points us…
Efficient Prediction of Excess Returns
It is well known that augmenting a standard linear regression model with variables that are correlated with the error term but uncorrelated with the original regressors will increase the asymptotic efficiency of the original coefficients. We argue that in the context of predicting excess returns, valid augmenting variables exist and are likely to yield substantial gains in estimation efficiency and, hence, predictive accuracy. The proposed augmen…
Credit Spreads as Predictors of Real-Time Economic Activity: A Bayesian Model-Averaging Approach
Employing a large number of financial indicators, we use Bayesian model averaging (BMA) to forecast real-time measures of economic activity. The indicators include credit spreads based on portfolios, constructed directly from the secondary market prices of outstanding bonds, sorted by maturity and credit risk. Relative to an autoregressive benchmark, BMA yields consistent improvements in the prediction of the cyclically sensitive measures of econ…
Economics (6 works) · Econometrics (5 works) · Monetary Policy and Economic Impact (5 works) · Autoregressive model (2 works) · Bond (2 works) · Computer Science (2 works) · Economic theories and models (2 works) · Finance (2 works) · Finance (2 works) · Financial Markets and Investment Strategies (2 works)