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
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.
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