From a banking supervisory perspective, this paper analyses aspects of market risk of an aggregated trading portfolio comprised of the trading books of 11 German banks with a regulatory approved internal market risk model. Based on real, clean profit and loss data and Value-at-Risk estimates of...

In an important generalization of zero frequency autoregressive unit root tests, Hylleberg, Engle, Granger, and Yoo (1990) developed regression-based tests for unit roots at the seasonal frequencies in quarterly time series. We develop likelihood ratio tests for seasonal unit roots and show that...

This paper provides tables of critical values for some popular tests of cointegration and unit roots. Although these tables are necessarily based on computer simulations, they are much more accurate than those previously available. The results of the simulation experiments are summarized by...

Macroeconomic risk assessments play an important role in the forecasts of many institutions. A risk forecast is related to the potential asymmetry of the forecast density. In this work, we investigate how the optimality of such risk forecasts can be tested. We find that the Pearson mode skewness...

The evaluation of multi-step-ahead density forecasts is complicated by the serial correlation of the corresponding probability integral transforms. In the literature, three testing approaches can be found which take this problem into account. However, these approaches can be computationally...

Inference using difference-in-differences with clustered data requires care. Previous research has shown that t tests based on a cluster-robust variance estimator (CRVE) severely over-reject when there are few treated clusters, that different variants of the wild cluster bootstrap can...

In this paper we propose exact likelihood-based mean-variance efficiency tests of the market portfolio in the context of Capital Asset Pricing Model (CAPM), allowing for a wide class of error distributions which include normality as a special case. These tests are developed in the framework of...

We suggest improved tests for cointegration rank in the vector au- toregressive (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....

Inference using large datasets is not nearly as straightforward as conventional econometric theory suggests when the disturbances are clustered, even with very small intra-cluster correlations. The information contained in such a dataset grows much more slowly with the sample size than it would...

From time to time, economies undergo far-reaching structural changes. In this paper we investigate the consequences of structural breaks in the factor loadings for the specification and estimation of factor models based on principal components and suggest test procedures for structural breaks....