In this paper we propose a contemporaneous threshold multivariate smooth transition autoregressive (C-MSTAR) model in which the regime weights depend on the ex ante probabilities that latent regime-specific variables exceed certain threshold values. The model is a multivariate generalization of...

This paper proposes a new procedure for detecting the presence of periodically collapsing rational bubbles via an analysis of the properties of the relevant observable time series. The procedure is based on random coefficient autoregressive models. An empirical application of the procedure to...

This paper considers Markov error-correction (MEC) models in which deviations from the long-run equilibrium are characterised by different rates of adjustment. To motivate our analysis and illustrate the various issues involved, our discussion is structured around the analysis of the long-run...

This paper considers the issue of testing for symmetry of the business cycle. It is demonstrated that findings of symmetry should be interpreted with caution since tests tend to have low power to detect asymmetries when applied to data that have been filtered to isolate their stationary...

When the hypothesis of linearity of a univariate time series model is tested using a battery of tests for neglected nonlinearity, the probability of one or more tests' leading to a false rejection increases with the number of tests being performed. This paper discusses how this undesirable...

This paper develops a model for the forward and spot exchange rate which allows for the presence of a Markov switching risk premium in the forward market and considers the issue of testing the unbiased forward exchange rate (UFER) hypothesis. Using US|UK data, it is shown that the UFER...

Considerable attention has been directed in the recent finance and economics literature to issues concerning the effects on company failure risk of changes in the macroeconomic environment. This paper examines the accounting ratio-based and macroeconomic determinants of insolvency exit of UK...

This paper addresses the problem of testing for the presence of a stochastic bubble in a time series in the case that the bubble is periodically collapsing so that the asset price keeps returning to the level implied by the market fundamentals. As this is essentially a problem of identifying the...

This paper addresses the problem of testing for the presence of unit autoregressive roots in seasonal time series with negatively correlated moving average components. For such cases, many of the commonly used tests are known to have exact sizes much higher than their nominal significance level....

Building on the work of Pantula (1986), this paper discusses how the hypothesis of conditional variance nonstationarity in the logarithmic family of generalized autoregressive conditional heteroskedasticity (GARCH) and stochastic volatility processes may be tested using regression-based tests....