Since the true nature of a time series process is often unknown it is important to understand the effects of model choice. This paper examines how the choice between modelling stationary time series as ARMA or ARFIMA processes affects the accuracy of forecasts. This is done, for first-order...

In this paper we introduce the Smooth Permanent Surge [SPS] model. The model is an integrated non lineal moving average process with possibly unit roots in the moving average coefficients. The process nests the Stochastic Permanent Break [STOPBREAK] process by Engle and Smith (1999) and in a...

This paper demonstrates that long memory leads to spurious rejection of the linearity hypothesis, when a STAR specification constitutes the alternative.

This paper considers nine long Swedish macroeconomic time series whose business cycle properties were discussed by Englund, Persson, and Svensson (1992) using frequency domain techniques. It is found by testing that all but two of the logarithmed and difference series are non-linear. The...

In this paper we show the consequences of applying a panel unit root test when testing for a purchasing power parity relationship. The distribution of the tests investigated, including the IPS test of Im et al (1997), are influenced by a common stochastic trend which is usually not accounted...

Properties of three well-known and frequently applied first-order models for modelling and forecasting volatility in financial series such as stock and exchange rate returns are considered. These are the standard Generalized Autoregressive Conditional Heteroskedasticity (GARCH), the Exponential...

In this paper, we propose two parametric alternatives to the standard GARCH model. They allow the conditional variance to have a smooth time-varying structure of either additive or multiplicative type. The suggested parameterizations describe both nonlinearity and structural change in the...

Asymptotic tests for fractional integration are usually badly sized in small samples, even for normally distributed processes. Furthermore, tests that are well-sized under normality may be severely distorted by non-normalities and ARCH errors. This paper demonstrates how the bootstrap can be...

In this note, we consider the contradiction between the fact that the best fit for the UK consumption data in Davidson et al. (1978) is obtained using an equation with an intercept but without an error correction term, whereas the equation with error correction and without the intercept has...

Asymptotic tests for fractional integration, such as the Geweke-Porter-Hudak test, the modified rescaled range test and Lagrange multiplier type tests, exhibit size-distortions in small-samples. This paper investigates a parametric bootstrap testing procedure, for size-correction, by means of a...