Show Summary Details

Page of

PRINTED FROM OXFORD HANDBOOKS ONLINE ( © Oxford University Press, 2018. All Rights Reserved. Under the terms of the licence agreement, an individual user may print out a PDF of a single chapter of a title in Oxford Handbooks Online for personal use (for details see Privacy Policy and Legal Notice).

date: 08 August 2020

Abstract and Keywords

This article looks at the usefulness of Bayesian methods in finance. It covers all the major topics in finance. It discusses the predictability of the mean of asset returns, central to finance, as it relates to the efficiency of financial markets. It reviews the economic relevance of predictability and its impact on optimal allocation. It also describes the Markov chain Monte Carlo (MCMC) and particle filtering algorithms that are important in modern Bayesian financial econometrics. MCMC algorithms have resulted in a tremendous growth in the use of stochastic volatility models in financial econometrics. This article also contains some major contributions of Bayesian econometrics to the literature on empirical asset pricing. Many of the other themes in modern Bayesian econometrics, including the use of shrinkage and the interaction between theory and econometrics are discussed. This article ends up with the discussion of a promising recent development in finance: filtering with parameter learning.

Keywords: optimal allocation, particle filtering algorithms, stochastic volatility models, empirical asset pricing

Access to the complete content on Oxford Handbooks Online requires a subscription or purchase. Public users are able to search the site and view the abstracts and keywords for each book and chapter without a subscription.

Please subscribe or login to access full text content.

If you have purchased a print title that contains an access token, please see the token for information about how to register your code.

For questions on access or troubleshooting, please check our FAQs, and if you can''t find the answer there, please contact us.