This article tests the linearity assumption underlying the popular heterogeneous autoregressive model for realized volatility (HAR-RV). We implement a consistent model specification test that is robust to both distributional and model misspecification. We find that, using a nonparametric HAR-RV...

It is well-known that economic and financial time series are characterized by nonlinearities. The literature does not agree, however, on the actual causes of such nonlinearities. In this paper, I investigate whether dynamics at different frequencies present different degree of nonlinearity, and...

We propose a test for the evaluation of statistical acceptability of a functional constraint which is imposed on parameters in the mixed data sampling regressions. The asymptotic behavior of the test statistic is characterized and a few other extensions are discussed.

We investigate the existence of nonlinearities in the dynamics of the returns of stock markets indices from CEE economies. We use several types of nonlinear tests. We discuss the implications of the results with respect to the efficient market hypothesis.

This paper analyzes the effect of omitting a persistent covariate in the GARCH-X model. In particular, we show that if the relevant persistent covariate is omitted and the usual GARCH(1,1) model is fitted, the model will be estimated approximately as an IGARCH model. This may well explain the...

This paper proposes an extension to threshold-type switching models that lets the threshold variable be a linear combination of exogenous variables with unknown coefficients. An algorithm to estimate the model’s parameters by least squares is provided and the validity of the methodological...

This paper evaluates weekly out-of-sample volatility forecast performance of univariate Mixed Data Sampling (MIDAS) model compared to the benchmark model of GARCH(1,1) for ten emerging stock markets. The results show that the MIDAS model offers a statistically better forecasting precision during...

The creation of a common cross-border stock trading platform is found, by use of a Flexible Dynamic Component Correlations (FDCC) model, to have increased long-run trends in conditional correlations between foreign and domestic stock market returns.

The asymptotic distributions of the maximum likelihood estimator of the persistence parameter are developed in a linear diffusion model under three sampling schemes, long-span, in-fill and double. Simulations suggest that the in-fill asymptotic distribution gives a more accurate approximation to...

Recently, there has been increasing interest in model averaging within frequentist paradigm. In the existing literature, for proving consistency of model averaging estimators, local mis-specification is assumed. In this paper, we show that under general fixed parameter setup, the model averaging...