Under the squared error loss, the optimal forecast is the conditional mean, and the one-step forecast error is a martingale difference (MD). The one-step forecast error forms the conditional moment condition obtained from the loss derivative with respect to the forecast. Similarly, under a...

When a price limit regime exists for all of the stocks involved in an index, the index return is an aggregate of limited variables and thereby it is restricted to the same limits. We argue that neither a censored nor a truncated distribution model is appropriate for the aggregate return. The...

Two approaches dominate the time series literature for modeling expected value models. The first one is based on observable variables and includes ARMA and GARCH models, while the second one is based on latent variables and includes state space and stochastic volatility (or SV) models. The first...

This paper proposes bootstrap versions of the seasonal unit root tests of, inter alia, Hylleberg, Engle, Granger and Yoo (1990,Journal of Econometrics 55, 305-328)[HEGY]. We report a simulation study of the properties of both the conventional and bootstrapped seasonal unit root tests when...

In real time forecasting, the sample is usually split into an estimation period of R observations and a prediction period of P observations, where T=R+P. Parameters are often estimated in a recursive manner, initially using R observations, then R+1 observations and so on until T-1 observations...

The present paper is related to the recent discussion about the efficiency of the Reserve Federal Bank on investment decisions. Our aim is not to propose an optimal policy rule but rather to appreciate and to understand the link between the monetary interventions of the FED and capital...

Different criteria exist to define long memory behavior. The two most used relate to the asymptotic decay of the autocovariance function of a process, and to the shape of its spectral density. In the case of a long memory process, the asymptotic decay of the autocovariance function is...

Forecasting inflation remains an intriguing research topic among academics and practitioners alike. Recent studies by Stock and Watson (1999 JME, 2003 JEL) have documented the limited usefulness of Phillip curve type models using unemployment or other macroeconomic and financial variables for...

We extend the standard specification of the market price of risk for affine yield models of the term structure of interest rates, and estimate several models using the extended specification. For most models, the extended specification fits US data better than standard specifications, often with...

In this paper we investigate portfolio coskewness using a quadratic market model as return generating process. It is shown that portfolios of small (large) firms have negative (positive) coskewness with market. An asset pricing model including coskewness is tested through the restrictions it...