Econometrics, economics, finance, random rants.

Econometrics, economics, finance, random rants...

Sunday, October 27, 2019

Machine Learning for Financial Crises


Below are the slides from my discussion of Helene Rey et al., "Answering the Queen: Machine Learning and Financial Crises", which I gave a few days ago at a fine NBER IFM meeting (program and clickable papers here). I also discussed it in June at the BIS annual research meeting in Zurich. The key development since the earlier mid-summer draft is that they actually implemented a real-time financial crisis prediction analysis for France using vintage data, as opposed to quasi-real-time using final-revised data. Moving to real time of course somewhat degrades the quasi-real-time results, but they largely hold up. Very impressive. Therefore I now offer suggestions for improving evaluation credibility in the remaining cases where vintage datasets are not yet available. On the other hand, I also note how subtle but important look-ahead biases can creep in even when vintage data are available and used. I conclude that the only fully-convincing evaluation involves implementing their approach moving forward, recording the results, and building up a true track record.









No comments:

Post a Comment

Note: Only a member of this blog may post a comment.