We propose a new test for the parametric form of the volatility function in continuous time diffusion models of the type dXt = a(t,Xt)dt + s(t,Xt)dWt. Our approach involves a range-based estimation of the integrated volatility and the integrated quarticity, which are used to construct the test...

We propose a new test for the parametric form of the volatility function in continuous time diffusion models of the type dXt = a(t;Xt)dt + _(t;Xt)dWt. Our approach involves a range-based estimation of the integrated volatility and the integrated quarticity, which are used to construct the test...

Out-of-sample tests of forecast performance depend on how a given data set is split into estimation and evaluation periods, yet no guidance exists on how to choose the split point. Empirical forecast evaluation results can therefore be difficult to interpret, particularly when several values of...

We consider hypothesis testing in a general linear time series regression framework when the possibly fractional order of integration of the error term is unknown. We show that the approach suggested by Vogelsang (1998a) for the case of integer integration does not apply to the case of...

We examine the joint predictability of return and cash flow within a present value framework, by imposing the implications from a long-run risk model that allow for both time-varying volatility and volatility uncertainty. We provide new evidence that the expected return variation and the...

We consider cointegration rank estimation for a p-dimensional Fractional Vector Error Correction Model. We propose a new two-step procedure which allows testing for further long-run equilibrium relations with possibly different persistence levels. The fi?rst step consists in estimating the...

Polynomial specifications are widely used, not only in applied economics, but also in epidemiology, physics, political analysis, and psychology, just to mention a few examples. In many cases, the data employed to estimate such estimations are time series that may exhibit stochastic nonstationary...

Linearity testing against smooth transition autoregressive (STAR) models when deterministic trends are potentially present in the data is considered in this paper. As opposed to recently reported results in Zhang (2012), we show that linearity tests against STAR models lead to useful results in...

We establish the equivalence between a commonly used out-of-sample test of equal predictive accuracy and the difference between two Wald statistics. This equivalence greatly simpli?es the computational burden of calculating recursive out-of-sample tests and evaluating their critical values. Our...

Declining inflation persistence has been documented in numerous studies. When such series are analyzed in a regression framework in conjunction with other persistent time series, spurious regressions are likely to occur. We propose to use the coefficient of determination R2 as a test statistic...