Finance Research Seminar - Andreas Neuhierl

Andreas Neuhierl - Washington University - St Louis

Friday 29 November 2024 - 11h45 to 13h00

Extranef 126

Speaker(s): Andreas Neuhierl Washington University - St Louis

The Uncertainty of Machine Learning Predictions in Asset Pricing

We develop novel methodology to construct forecast confidence intervals (FCI) for machine learning predictions in asset pricing. We show FCIs for machine learning predictions obtained from sophisticated ML methods, such as neural networks, can be accurately approximated by simpler nonparametric methods such as B-splines. We prove that these FCIs provide correct coverage probabilities. In addition, we also establish the validity of a version of the wild bootstrap. We illustrate the practical use of the obtained confidence intervals in the context of a portfolio selection application for an uncertainty averse investor. 

Published from 22 August 2024 to 30 November 2024
Departement Finance
Visibility:
published