This paper investigates some structural properties of a family of GARCH processes. A simple sufficient condition for the existence of the αδ-order stationary solution of the processes is derived, where α ∈ (0, 1] and δ 0. The solution is strictly stationary and ergodic, and the causal...

In this paper we examine the asymptotic properties of the estimator of the long-run coefficient (LRC) in a dynamic regression model with integrated regressors and serially correlated errors. We show that the OLS estimators of the regression coefficients are inconsistent but the OLS-based...

This paper proposes new methodologies for evaluating out-of-sample forecasting performance that are robust to the choice of the estimation window size. The methodologies involve evaluating the predictive ability of forecasting models over a wide range of window sizes. We show that the tests...

We evaluate conditional predictive densities for U.S. output growth and inflation using a number of commonly used forecasting models that rely on a large number of macroeconomic predictors. More specifically, we evaluate how well conditional predictive densities based on the commonly used...

We propose new methods for evaluating predictive densities. The methods include Kolmogorov-Smirnov and Cramér-von Mises-type tests for the correct specification of predictive densities robust to dynamic mis-specification. The novelty is that the tests can detect mis-specification in the...

The goal of this paper is to develop formal tests to evaluate the relative in-sample per- formance of two competing, misspecified, non-nested models in the presence of possible data instability. Compared to previous approaches to model selection, which are based on measures of global...

We propose new methods for evaluating predictive densities in an environment where the estimation error of the parameters used to construct the densities is preserved asymptotically under the null hypothesis. The tests offer a simple way to evaluate the correct specification of predictive...

We explore the linkage between equity and commodity markets, focusing in particular on its evolution over time. We document that a country's equity market value has significant out-of-sample predictive ability for the future global commodity price index for several primary commodity-exporting...

We show the existence of a very short-term relationship at the daily frequency between changes in the price of a country's major commodity export price and changes in its nominal exchange rate. The relationship appears to be robust and to hold when we use contemporaneous (realized) commodity...

This paper proposes a framework to implement regression-based tests of predictive ability in unstable environments, including, in particular, forecast unbiasedness and efficiency tests, commonly referred to as tests of forecast rationality. Our framework is general: it can be applied to...