Subsequent to the influential paper of [Chan, K.C., Karolyi, G.A., Longstaff, F.A., Sanders, A.B., 1992. An empirical comparison of alternative models of the short-term interest rate. Journal of Finance 47, 1209-1227], the generalised method of moments (GMM) has been a popular technique for...

Although many economic variables of interest exhibit a tendency to revert to long-run levels, mean reverting processes are rarely used in investment and disinvestment models in the literature. Previous work by Sarkar (J Econ Dyn Control 28(2):377–396, <CitationRef CitationID="CR34">2003</CitationRef>), that focuses on irreversible entry...</citationref>

The stationarity of OECD real exchange rates over the period 1972–2008 is tested using a panel of 26 member countries. The methodology followed stems from the need to meet several key concerns: (i) the identification of which panel members are stationary; (ii) the presence of cross-sectional...

In this paper we investigate trading with optimal mean reverting portfolios subject to cardinality constraints. First, we identify the parameters of the underlying VAR(1) model of asset prices and then the quantities of the corresponding Ornstein-Uhlenbeck (OU) process are estimated by pattern...

Since economic theory provides reasons for nonlinearity in economic variables due to frictions/distortions in the economy, the use of linear unit root tests to examine the nonstationary properties of per-capita GDP (PCGDP) may provide misleading results. With this background we have analyzed the...

This paper reviews extant research on commodity price dynamics and commodity derivative pricing models. In the first half, we provide an overview of key characteristics of commodity price behavior that have been explored and documented in the theoretical and empirical literature. In the second...

We analyse the effect of differing uncertainty assumptions on the costs of shareholder-bondholder conflicts arising from partially debt-financed investments. A partial equilibrium model, valid for a large class of diffusion processes, is developed and then applied to the specific cases of a...

This paper explores the mean-reverting behavior of the unemployment rate using monthly geographically disaggregated data for the period 1991:01 through 2012:02. We apply both standard unit-root tests and tests that allow for one and two structural breaks in the mean. We find evidence that favors...

This paper re-examines the issue of mean reversion in stock prices by incorporating the structural break effect in the long horizon regression. Before adjusting for structural break, the paper finds that previous studies understate the evidence of mean-reversion. The understatement is mainly due...