In this paper we develop a testing and modelling procedure for describing the long-term volatility movements over very long return series. For the purpose, we assume that volatility is multiplicatively decomposed into a conditional and an unconditional component as in Amado and Teräsvirta...

It has been found that the t-statistic for testing the null of no relationship between two independent variables diverges asymptotically under a wide variety of nonstationary data generating processes. This paper introduces a simple method which guarantees convergence of this t-statistic to a...

We derive the parameter restrictions that a standard equity market model implies for a bivariate vector autoregression for stock prices and dividends, and we show how to test these restrictions using likelihood ratio tests. The restrictions, which imply that stock returns are unpredictable, are...

The present paper tests for the existence of multicointegration between real per capita private consumption expenditure and real per capita disposable personal income in the USA. In doing so, we exploit the fact that the flows of disposable income and consumption expenditure on the one hand, and...

In this paper, we propose two parametric alternatives to the standard GARCH model. They allow the conditional variance to have a smooth time-varying structure of either additive or multiplicative type. The suggested parameterizations describe both nonlinearity and structural change in the...

The literature on spurious regressions has found that the t-statistic for testing the null of no relationship between two independent variables diverges asymptotically under a wide variety of nonstationary data generating processes for the dependent and explanatory variables. This paper...

In this paper we investigate the effects of careful modelling the long-run dynamics of the volatil- ities of stock market returns on the conditional correlation structure. To this end we allow the individual unconditional variances in Conditional Correlation GARCH models to change smoothly over...

This paper proposes a sequential procedure to determine the common cointegration rank of panels of cointegrated VARs. It shows how a panel of cointegrated VARs can be transformed in a set of independent individual models. The likelihood function of the transformed panel is the sum of the...

In this paper, we propose two parametric alternatives to the standard GARCH model. They allow the variance of the model to have a smooth time-varying structure of either additive or multiplicative type. The suggested parameterisations describe both nonlinearity and structural change in the...

In static single equation cointegration regression models the OLS estimator will have a non-standard distribution unless regressors are strictly exogenous. In the literature a number of estimators have been suggested to deal with this problem, especially by the use of semi-nonparametric...