On 27 August 2025, the Faculty of Finance at the City University of Macau organized the first Academic Salon at the Golden Dragon Campus. This academic salon invited Assistant Professor Yu Bai, from City University of Macau. His research paper titled “Optimal Bandwidth Selection for Forecasting under Parameter Instability”.

This paper addresses some issues associated with the local estimator in forecasting models that are affected by parameter instability. The paper proposes an approach to select the bandwidth parameter in the context of out-of-sample forecasting. Derived using the criterion of minimizing the conditional expected end-of-sample loss, the selection procedure is shown to be asymptotically optimal. The theoretical results are examined through an extensive Monte Carlo study. Two empirical applications on forecasting bond returns and inflation demonstrate the superior forecasting performance of the proposed local estimator with the optimal bandwidth selection procedure.

In this academic salon, Assistant Professor Bai shared his latest research findings with the Faculty of Finance, broadening the academic scope of the faculty. The Faculty of Finance Academic Salon at the City University of Macau is a platform for exchanging academic ideas and enhancing academic awareness. We focus on finance, inviting experts from academia and the financial industry to discuss cutting-edge research and share industry development trends, aiming to bring new academic experiences and thinking models to the faculty and students of the university. We hope that through academic activities like the academic salon, we can provide a better academic platform for graduate students and encourage further exploration and research of academic issues among faculty and students.