In mathematical finance diffusion models are widely used and a variety of different parametric models for the drift and diffusion coefficient coexist in the literature. Since derivative prices depend on the particular parametric model of the diffusion coefficient function of the underlying, a...

We make use in this article of a testing procedure suggested by Robinson (1994) for testing deterministic seasonality versus seasonal fractional integration. A new test statistic is developed to simultaneously test both, the order of integration of the seasonal component and the need of seasonal...

New macro empirical evidence is provided to assess the relative importance of object and idea gaps in explaining the world income distribution dynamics. Formal statistical hypothesis tests allow us to discriminate between two competing growthmodels: (i) the standard neoclassical growth model...

We suggest improved tests for cointegration rank in the vector autoregressive (VAR) model and develop asymptotic distribution theory and local power results. The tests are (quasi-)likelihood ratio tests based on a Gaussian likelihood, but of course the asymptotic results apply more generally....

This paper examines the limiting properties of the estimated parameters in the random field regression model recently proposed by Hamilton (Econometrica, 2001). Though the model is parametric, it enjoys the flexibility of the nonparametric approach since it can approximate a large collection of...

We analyze daily changes of two log foreign exchange (FX) rates involving the Deutsche Mark (DEM) for the period 1975 - 1998, namely FX-rates measured against the US dollar (USD) and the Japanese yen (JPY). Ta account for volatility e1ustering we fit a GARCH(l,l)-model with leptokurtic...

The concept of integrated stochastic processes is widely used in empirical macroeconomics; and cointegration analysis is an important framework to analyze economic time series both in single equation and in system approaches. This framework is not only suited to study the relationships between...

This paper examines the relationship between unemployment, real oil price and real interest rates in Canada. Instead of following the classical approach based on I(0) stationarity or I(1) cointegrating relationships, we use fractional integration/cointegration techniques which allow for the...

Daily returns of financial assets are frequently found to exhibit positive autocorrelation at lag 1. When specifying a linear AR(l) conditional mean, one may ask how this predictability affects option prices. We investigate the dependence of option prices on autoregressive dynamics under...

The so-called 'Monday effect ' has been found for various stock markets of the world. The empirical finding that Monday returns are significantly smaller than returns measured for the remaining days of the week calls the efficiency hypothesis for pricing processes operating on stock markets into...