With an eye toward financial asset pricing, asset allocation, and risk management, I review and interpret the rapidly-growing literature on modeling and forecasting realized volatility constructed from high-frequency returns. I discuss a variety of applications and extensions, including recent...

The single source of error state space Vector Simple Exponential Smoothing model is introduced. A hypothesis free two-stage methodology that detects and defines the reduced rank of a smoothing matrix is proposed. A singular value decomposition of the smoothing matrix forms the basis of both stages

Spatial models of voting behaviour are the dominant paradigm in political science. Consistent with this approach, it will be the case that, ceteris paribus, voters should vote for the party nearest to them on the political spectrum. A key question is how we measure nearness or distance. We...

In recent years, there has been much debate on whether or not countries in a region should adopt a common currency. One of the criteria for assessing the suitability of forming a currency union is whether there is a sufficient risk-sharing mechanism in operation. Although adopting a common...

This paper considers tests of misspecification in a heteroscedastic transformation model. We derive Lagrange multiplier (LM) statistics for (i) testing functional form and heteroscedasticity jointly, (ii) testing functional form in the presence of heteroscedasticity, and (iii) testing...

There are two crucial conditions for cross-sectional aggregation of AR(1) parameters to produce long memory: 1) heterogeneity and 2) proximity to the unit root. We analyze role of moments, namely the mean and variance, of the distribution of the AR(1) coefficients in generating long memory. The...

A transport noise-pricing model is developed, which distinguishes between transport sound externalities, real resource costs of transport noise externalities and monetary valuations of such costs. It differs from existing approaches (hedonic pricing and contingent valuation), which aim at...

VAR models are used in practice in preference to VARMA models due to the difficult issues involved in the identification and estimation of VARMA models. This paper examines if VAR models are good enough for forecasting macroeconomic variables. To answer this question, we extend the Tiao and Tsay...

In this presentation I view a Malmquist productivity index as a theoretical index with desirable properties. I then discuss the properties of three approximations to it: an empirical Malmquist index, and Fisher and Tornqvist indexes. Next I discuss the decomposition properties of the theoretical...

In examining the likely consequences of nonsense relationship, Granger and Newbold (1974) made it clear that the differencing is not the universal sure solution to the problem of spurious regression models. This has prompted the discovery of the cointegration regression estimation by Engle and...