This paper proposes a discrete-state stochastic volatility model with duration-dependent mixing. The latter is directed by a high-order Markov chain with a sparse transition matrix. Ž . As in the standard first-order Markov switching MS model, this structure can capture turning points and shifts in volatility, due for example, to policy changes or news events. Ž . However, the duration-dependen...

Do large firm dynamics drive the business cycle? We answer this question by developing a quantitative theory of aggregate fluctuations caused by firm-level disturbances alone. We show that a standard heterogeneous firm dynamics setup already contains in it a theory of the business cycle, without appealing to aggregate shocks. We offer a complete analytical characterization of the law of motion ...

We examined the effects of trading volume on the persistence of the time-varying conditional volatility of returns and the dynamic relations between trading volume and returns (and volatility) for both domestic and cross-country markets. We considered daily prices and trading volume in four Asian stock exchanges (Korea, Japan, China, and Hong Kong). For the analysis, we used the GARCH model, wh...

A model for a financial asset is constructed with two types of agents, who differ in terms of their beliefs. The proportion of the two types changes over time according to stochastic processes which model the interaction between the agents. Agents do not persist in holding “wrong” beliefs and bubble–like phenomena in the asset price occur. We consider tests for detecting bubbles in the conditio...

Propagation in equilibrium models of search unemployment is significantly altered when vacancy costs require some external financing on frictional credit markets. The easing of financing constraints during an expansion reduces the opportunity cost of resources allocated to job creation, raising the elasticity of market tightness through (i) a cost channel, increasing incentive to recruit for a ...

Analysis of the the standard labor-market matching model usually focuses on labor productivity as an important source business of cycles. A shortcoming of this model is that it cannot account for observed labor market fluctuations with aggregate labor productivity as the only shock in the economy. Yet analysis of this framework disregards another potentially important source of business cycle f...

We study the statistical properties of volatility—a measure of how much the market is likely to fluctuate. We estimate the volatility by the local average of the absolute price changes. We analyze (a) the S&P 500 stock index for the 13-year period Jan 1984 to Dec 1996 and (b) the market capitalizations of the largest 500 companies registered in the Trades and Quotes data base, documenting all t...

Chaoqun Ma a Hongquan Li b,*1 Lin Zou (a College of Business Administration, Hunan University, Changsha, P.R.China, 410082) (b School of Business, Hunan Normal University, Changsha, P.R.China, 410081) Abstract: The notion of long memory, or long-term dependence, has received considerable attention in empirical finance. This paper makes two main contributions. First, the paper aims to provide ev...

It generally is difficult, if not impossible, to fully understand and interpret nonlinear time series models by considering the estimated values of the model parameters only. To shed light on the characteristics and implications of a nonlinear model it can then be useful to consider the effects of shocks on the future patterns of the time series variable. Most interest in such impulse response ...

Using the multiple threshold autoregressive and moving average (TARMA) model we analyze the nonlinearities in the dynamics of realized volatilities of daily stock returns of 30 companies in the Dow Jones index. We find that the realized volatility processes can be characterized by the high, moderate, and low regimes and that the persistence, variance and ARMA error term change with each regime....