This paper proposes a nonlinear panel data model which can endogenously generate both ‘weak’ and ‘strong’ cross-sectional dependence. The model’s distinguishing characteristic is that a given agent’s behaviour is influenced by an aggregation of the views or actions of those around...

This paper develops two tests for parametric volatility function of a diffusion model based on Khmaladze (1981)’s martingale transformation. The tests impose no restrictions on the functional form of the drift function and are shown to be asymptotically distribution-free. The tests are...