Alternative modeling strategies for specifying subset VAR models are considered. It is shown that under certain conditions a testing procedure based on t-ratios is equivalent to sequentially eliminating lags that lead to the largest improvement in a prespecified model selection criterion. A...

A new kind of mixture autoregressive model with GARCH errors is introduced and applied to the U.S. short-term interest rate. According to the diagnostic tests developed in the paper and further informal checks the model is capable of capturing both of the typical characteristics of the...

The unbiased expectations hypothesis states that forward rates are unbiased estimates for future short rates. Cox, Ingersoll and Ross [1] conjectured that this hypothesis should be inconsistent with the absence of arbitrage possibilities. Using the framework of Heath, Jarrow and Morton [4] we...