Basel II regulatory capital formula could imply substantial gaps between the long run PD and the short run historical average. Hence, banks might need to raise their short run historical average of internal PD substantially. Under through-the-cycle rating system, they might have to increase it...

In order to explain the U-shaped pattern of autocorrelations of stock returns i.e., autocorrelations starting around 0 for short-term horizons and becoming negative and then moving toward 0 for long-term horizons, researchers suggested the use of a state-space model consisting of an I(1)...

In this study we examine the long term behavior of stock returns. The analysis reveals that negative autocorrelations of the returns exist for a super-long horizon as long as 10 years. This pattern, however, contrasts to predictions of previous stock price models which include random walks. We...