Tests of ARCH are a routine diagnostic in empirical econometric and financial analysis. However, it is well known that misspecification of the conditional mean may lead to spurious rejections of the null hypothesis of no ARCH. Nonlinearity is a prime example of this phenomenon. There is little...

We introduce a time series model that captures both long memory and conditional heteroskedasticity and assess their ability to describe the US inflation data. Specifically, the model allows for long memory in the conditional mean formulation and uses a normal mixture GARCH process to...

Applications of zero-inflated count data models have proliferated in empirical economic research. There is a downside to this development, as zero-inflated Poisson or zero-inflated Negative Binomial Maximum Likelihood estimators are not robust to misspecification. In contrast, simple Poisson...

This article investigates power and size of some tests for exogeneity of a binary explanatory variable in count models by conducting extensive Monte Carlo simulations. The tests under consideration are Hausman contrast tests as well as univariate Wald tests, including a new test of notably easy...

This paper applies the Model Confidence Set (MCS) procedure of Hansen, Lunde, and Nason (2003) to a set of volatility models. A MCS is analogous to confidence interval of a parameter in the sense that the former contains the best forecasting model with a certain probability. The key to the MCS...

Data on short investments in Swedish long-term bonds as the bonds mature contains unusually rich information about the relationship between duration and the first and second moments of bond returns. We identify three different channels through which duration affects bond returns. The liquidity...

We consider the problem of estimating the fractional order of a Lévy process from low frequency historical and options data. An estimation methodology is developed which allows us to treat both estimation and calibration problems in a unified way. The corresponding procedure consists of two...

This work develops change-point methods for statistics of high-frequency data. The main interest is the volatility of an Itô semi-martingale, which is discretely observed over a fixed time horizon. We construct a minimax-optimal test to discriminate different smoothness classes of the...

Empirical studies have shown that a large number of financial asset returns exhibit fat tails and are often characterized by volatility clustering and asymmetry. Also revealed as a stylized fact is Long memory or long range dependence in market volatility, with significant impact on pricing and...

We study how total factor productivity (TFP), energy prices, and the Great Moderation are linked. First we estimate a joint stochastic process for the energy price and TFP and establish that until the second quarter of 1982, energy prices negatively affected productivity. This spillover has...