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When testing the null hypothesis of linearity of a univariate time series against smooth transition autoregression (STAR), standard asymptotic distribution results do not apply since nuisance parameters in the model are unidentified under the null hypothesis. The prevailing test of Luukkonen,...
Persistent link: https://www.econbiz.de/10005649293
This paper proposes several resampling algorithms suitable for error component models and evaluates them in the context of bootstrap testing. In short, all the algorithms work well and lead to tests with correct or close to correct size. There is thus little or no reason not to use the bootstrap...
Persistent link: https://www.econbiz.de/10005649435
According to the Uncovered Interest Parity (UIP) condition, interest rate differentials compensate for expected exchange rate changes, equalizing the expected returns from holding assets which only differ in terms of currency denomination. In the previous literature, there are many tests of UIP...
Persistent link: https://www.econbiz.de/10005014555
The devaluation of the Mexican peso of 1995 along with the more recent financial crises in emerging economies are viewed as systematic outcomes of the operation of free currency markets. The hypothesis is that there exists a distortion in free currency markets that makes developing countries...
Persistent link: https://www.econbiz.de/10005649198
This paper uses daily capital flows to the Swedish bond market to analyse the relative information endowment of domestic and foreign investors. Using the standard framework of a noisy rational expectations equilibrium it is shown that foreign investors are, on average, better informed than...
Persistent link: https://www.econbiz.de/10005423862
This paper develops and tests implications of cross-security information aggregation on index return autocorrelation. In the model, prices are realised individually and simultaneously in REE auction markets, then realigned to take information revealed in other prices into account. This...
Persistent link: https://www.econbiz.de/10005649184
The symmetry of an electronic limit order book is studied using high-frequency data. Is the order flow generated by buyers of the same structure as the one by sellers or would factors such as short selling restrictions and information trading result in asymmetries in the order flow? A model...
Persistent link: https://www.econbiz.de/10005649360
The panel cointegration test of Larsson et al (1998) test for the maximum number of cointegrating relations in a dynamic panel given the assumption of a common cointegrating rank. This paper presents a test for this assumption. The test is based on the test statistic of Larsson et al (1998) and...
Persistent link: https://www.econbiz.de/10005207177
Departures from an economic equilibrium should be mean reverting. The deviations are often assumed to be integrated of order zero but this is too restrictive. It is sufficient that the shocks are integrated of an order less than one, i.e. they may be fractionally integrated. A fractionally...
Persistent link: https://www.econbiz.de/10005207187
This note proposes a tool to investigate and demonstrate the adequacy of the central limit theorem in small samples. The suggested testing procedure provides a method to investigate if the mean estimator is approximately normally distributed, given data and sample size at hand. This is important...
Persistent link: https://www.econbiz.de/10005207190