Markov Chain Monte Carlo Methods in Financial Econometrics

Financial Markets and Portfolio Management, Vol. 19, No. 4, pp. 397-406, 2005

Posted: 24 Jan 2006

See all articles by Michael Verhofen

Michael Verhofen

University of St. Gallen - Swiss Institute of Banking and Finance; Allianz Global Investors

Abstract

Markov Chain Monte Carlo (MCMC) methods have become very popular in financial econometrics during the last years. MCMC methods are applicable where classical methods fail. In this paper, we give an introduction to MCMC and present recent empirical evidence. Finally, we apply MCMC methods to portfolio choice to account for parameter uncertainty and to incorporate different degrees of belief in an asset pricing model.

Suggested Citation

Verhofen, Michael, Markov Chain Monte Carlo Methods in Financial Econometrics. Financial Markets and Portfolio Management, Vol. 19, No. 4, pp. 397-406, 2005, Available at SSRN: https://ssrn.com/abstract=876935

Michael Verhofen (Contact Author)

University of St. Gallen - Swiss Institute of Banking and Finance ( email )

Unterer Graben 21
St. Gallen, CH-9000
Switzerland

HOME PAGE: http://www.verhofen.com

Allianz Global Investors ( email )

Frankfurt
Germany

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