1
$\begingroup$

I am trying to map shocks from VAR to discount-rate and cash-flows news following the paper of Campbell and Vuolteenaho (2004). It is said that news are a linear combination of shocks from VAR at (t+1) (see the formula on the picture). However, that means that both news will be perfectly correlated just by construction, or do I miss something?

enter image description here

Maybe anybody did it before and can explain it? Any help is very appreciated!

$\endgroup$

0

Your Answer

By clicking “Post Your Answer”, you agree to our terms of service and acknowledge you have read our privacy policy.

Browse other questions tagged or ask your own question.