Dynamic asset pricing models with nonparametric expectations

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In empirical studies of the financial market nonparametric expectation formation is now widely applied to value financial assets. It has been recognized that those flexible techniques face problems of overfitting and data snooping, i. e. explanatory power and predictability may be strongly over-estimated. On the other hand, restrictive assumptions of standard economic models do not allow for explaining widely agreed stylized facts found in financial markets. The goal of this work is to extend recent empirical research that has started to combine flexibility of nonparametric expectations and simple, but persistent structure of economic models. The author has studied at U. C. L. A. and universities in Bielefeld and Kiel. Since 1999 he is consultant to Deutsche Bank and Credit Suisse.