There have been numerous attempts at the formation of regional policy groupings within Latin America and the Caribbean (LAC). This paper analyses the similarities in macroeconomic policies pursued by member countries using realised correlation analysis on 26 LAC countries and observations covering the period 1970–2005. The study finds evidence of co-movement in monetary, fiscal, trade and capit...

In this chapter, we discuss the use of mixed frequency models and diffusion index approximation methods in the context of prediction. In particular, select recent specification and estimation methods are outlined, and an empirical illustration is provided wherein U.S. unemployment forecasts are constructed using both classical principal components based diffusion indexes as well as using a comb...

In this paper a Bayesian approach to unit root testing for panel data models is proposed based on the comparison of stationary autoregressive models with and without individual deterministic trends, with their counterpart models with a unit autoregressive root. This is done under cross-sectional dependence among the units of the panel. Simulation experiments are conducted with the aim to assess...

This note examines the stochastic properties of US term spreads with parametric and semiparametric fractional integration techniques. Since the observed data (rather than the estimated residuals from a cointegrating regression) are used for the analysis, standard methods can be applied. The results indicate that US Treasury maturity rates are I(1) in most cases, although the order of integratio...

This paper investigates the effects of temporal aggregation when the aggregation frequency is variable and possibly stochastic. The results that we report include, as a particular case, the well-known results on fixed-interval aggregation, such as when monthly data is aggregated into quarters. A variable aggregation frequency implies that the aggregated process will exhibit time-varying paramet...

We propose a concept of intraday overreaction characterized by intraday price movements which are corrected within the same trading day. It is a concept of relative overreaction in the sense that the price range within a trading day is large in comparison with the openclose return volatility. As a one-sided concept it allows to distinguish between upward and downward overreaction. A test for ov...

Are share markets too volatile? While it is difficult to ignore share market volatility it is important to determine whether volatility is excessive. This paper replicates the Shiller (1981) test as well as applying standard time series analysis to annual Australian stock market data for the period 1883 to 1999. While Shiller’s test suggests the possibility of excess volatility, time series ana...

The two-break unit root test of Lumsdaine and Papell (1997) is examined and found to suffer from bias and spurious rejections in the presence of structural breaks under the null. A two-break minimum LM unit root test is proposed as a remedy. The two-break LM test does not suffer from bias and spurious rejections and is mostly invariant to the size, location, and misspecification of the breaks. ...

This paper introduces a Lagrange Multiplier (LM) test for testing an autoregressive structure in a binary time series model proposed by Kauppi and Saikkonen (2008). Simulation results indicate that the two versions of the proposed LM test have reasonable size and power properties when the sample size is large. A parametric bootstrap method is suggested to obtain approximately correct sizes also...

This study tests the presence of the day of the week effect on stock market volatility by using the S&P 500 market index during the period of January 1973 and October 1997. The findings show that the day of the week effect is present in both volatility and return equations. While the highest and lowest returns are observed on Wednesday and Monday, the highest and the lowest volatility are obser...