interpretability, HVAR introduces maximization in lag order selection dealing with increasing maximal order. In other models, forecasting performances tend to degrade as lag order increases. Furthermore, for la
The loading, βi,t, is interpretable as exposure to systematic risk factors, and λt as the risk price associated with factors. More specifically, when mt+1 is linear in factors ft+1, this maps to a factor model for excess returns of the form1ri,t+1=αi,t+βi,t′ft+1+ϵi,t...
Interpretation of MR in terms of model coefficients, and causal effects:We show that MR for an additive model can be written as a function of the model’s coefficients (Proposition 15), and that MR for a binary covariateX1 can be written as a function of the conditional cau...