Relying on a present value model with time-varying expected returns, and incorporating a quite general class of processes to model bubble-like stock price deviations from the long-run equilibrium, we provide empirical evidence on the U.S. log dividend–price ratio over the 1871:1–2001:9 period, as well as for several sub-periods. The application of a momentum threshold autoregressive technique d...

This paper proposes a factor augmented autoregressive distributed lag (FADL) framework for analyzing the dynamic effects of common and idiosyncratic shocks. We first estimate the common shocks from a large panel of data with a strong factor structure. Impulse responses are then obtained from an autoregression, augmented with a distributed lag of the estimated common shocks. The approach has thr...

We propose a new method to determine the cointegration rank in the error correction model of Engle and Granger (1987). To this end, we first estimate the cointegration vectors in terms of a residual-based principal component analysis. Then the cointegration rank, together with the lag order, is determined by a penalized goodness-of-fit measure. We have shown that the estimated cointegration vec...

This paper provides closed-form likelihood approximations for multivariate jump-diffusion processes widely used in finance. For a fixed order of approximation, the maximum-likelihood estimator (MLE) computed from this approximate likelihood achieves the asymptotic efficiency of the true yet uncomputable MLE as the sampling interval shrinks. This method is used to uncover the realignment probabi...

The paper evaluates the distributional effects of conventional and unconventional monetary policies for the USA. The distributional effects are evaluated for the overall impact on the income distribution, using Gini index. The paper also assesses the effects of conventional and unconventional monetary policies on the different parts of income distribution, employing corresponding percentile rat...

In this paper, an empirically stable money demand model for M3 in the euro area is constructed. Starting with a multivariate system, three cointegrating relationships with economic content are found: (i) the spread between the longand the short-term nominal interest rates, (ii) the long-term real interest rate, and (iii) a long-run demand for broad money M3. There is evidence that the determina...

This paper develops two very simple tests for the null hypothesis of no cointegration in panel data. The tests are general enough to allow for heteroskedastic and serially correlated errors, unit specific time trends, cross-sectional dependence and an unknown structural break in both the intercept and slope of the cointegrated regression, which may be located at different dates for different un...

In this paper, I examine the effects of money supply, aggregate spending, and aggregate supply shocks on real US stock prices in a structural vector autoregression framework. Overall, the empirical results indicate that each macro shock has important effects on real stock prices. The real stock price impulse responses to the various macro shocks conform to the standard present-value equity valu...

In this paper, we examine the convergence hypothesis using a long memory framework that allows for structural breaks and does not rely on a benchmark country using both univariate and multivariate estimates of the long memory parameter d. Using per capita GDP gaps, we confirm the findings of non-stationarity and long memory behavior that have been found previously in the literature using univar...

Decomposing volatilities into a common market-driven component and an idiosyncratic itemspecific one is an important issue in financial econometrics. This, however, requires the statistical analysis of large panels of time series, hence faces the usual challenges associated with highdimensional data. Factor model methods in such a context are an ideal tool, but they do not readily apply to the ...