This paper discusses inference about the pre and post break value of a scalar parameter in GMM time series models with a single break at an unknown point in time. We show that treating the break date estimated by least squares as the true break date leads to substantially oversized tests and confidence intervals unless the break is large. We develop an alternative test that controls size unifor...

Recent evidence has shown possible scaling and self-similarity in high frequency financial time series. This paper demonstrates that many of these graphical scaling results could have been generated by a simple stochastic volatility model. This casts doubt on the power of these tests to discern between true scaling and simple highly dependent stochastic processes. JEL Classification: C32, G12 ∗...

This paper proposes a simple direct testing procedure to distinguish a linear unit root process from a globally stationary three-regime self-exciting threshold autoregressive process. We derive the asymptotic null distribution of the Wald statistic, and show that it does not depend on unknown fixed threshold values. Monte Carlo evidence clearly indicates that the exponential average of the Wald...

This paper proposes a new methodology to build composite coincident and leading indexes. Based on a formal definition that requires that the first differences of the leading index is the best linear predictor of the first differences of the coincident index, it is shown that the notion of polynomial serial correlation common features can be used to build these composite variables. Concepts and ...

The Enders and Granger (1998) unit-root test against stationary alternatives with asymmetric adjustment is applied to the extended Nelson and Plosser dataset. The test rejects the unit-root null roughly as frequently as does the ADF test. JEL Classification C32, E32 * Correspondence: Philip Rothman Department of Economics East Carolina University Greenville, NC 27858 Phone: 252-328-6151 Fax: 25...

We develop a multivariate generalization of the Markov–switching GARCH model introduced by Haas, Mittnik, and Paolella (2004b) and derive its fourth– moment structure. An application to international stock markets illustrates the relevance of accounting for volatility regimes from both a statistical and economic perspective, including out–of–sample portfolio selection and computation of Value– ...

We investigate the effects of outliers on the KPSS tests. We find that for nonstationary series outliers induce spurious stationarity by lowering the power of these tests. The empirical size of these tests is also found to be sensitive to the location of the outlier. JEL classification: C15, C22

This paper estimates the speed of the adjustment coefficient in structural error correction models (ECM) and employs a system method for real exchange rates with Hansen and Sargent’s (1980, 1982) IV methods. Empirical results show that the half-lives of purchasing power parity deviations are less than one year in most cases. JEL classification: C22, F31, F41

This study shows that annual output data of the G7 countries in the twentieth century are better characterized as transitory deviations from a (shifting) growth trend than as integrated processes. Furthermore, I find no two countries share common business cycles. JEL classification: C22, E32, 057

This article proposes a functional dynamic factor model for the evaluation of the impact of scalar– and curve–valued factors on the shapes of intraday price curves. The asymptotic theory leads to practically useful confidence intervals for the factor coefficients. The main findings pertain to the impact of the shapes of intraday oil futures on the shapes of intraday prices of blue chip stocks. ...