In this paper, we propose a nonlinear cointegration test for heterogeneous panels where the alternative hypothesis is an exponential smooth transition (ESTAR) model. We apply our tests for investigating cointegration relationship between energy consumption and economic growth for the G7...

GARCH models have been extensively used in risk modeling under the normal distribution. Although they generate highly significant coefficient estimates, these models are known to have poor forecasting power. It is therefore interesting to develop a different approach of risk modeling to improve...

Although dependence in financial data is pervasive, standard doctoral-level econometrics texts do not make clear that the common central limit theorems (CLTs) contained therein fail when applied to dependent data. More advanced books that are clear in their CLT assumptions do not contain any...

Conventional tests of the predictability of stock returns could be invalid, that is reject the null too frequently, when the predictor variable is persistent and its innovations are highly correlated with returns. We develop a pretest to determine whether the conventional t-test leads to invalid...

This paper comprises an empirical analysis of trading-restricted, business days and trading, non-business days on the Australian Stock Exchange (ASX). Trading-restricted, business days refer to days where trading hours are shorter but business activity (including settlement) is normal; trading,...

This paper examines calendar effects in Australian daily stock returns from 6 January 1958 to 30 December 2005. Three calendar effects - day-of-the-week, turn-of-the-month and month-of-the-year - are examined using parametric tests and a regression-based approach. The results indicate that the...

This letter examines the month-of-the-year effect in Australian daily stock returns at the market and industry levels and for small capitalisation stocks from Monday 9 September 1996 to Friday 10 November 2006. A regression-based approach is employed. The results indicate that marketwide returns...

Standard inference works poorly in models of the form y=gamma*g(beta,x) epsum, because the standard error for beta_hat depends on gamma_hat. In this paper we show that this problem is usefully studied by working with the linearization of g(.) and the resulting reduced form regression. Bias and...

We consider time series models in which the conditional mean of the response variable given the past depends on latent covariates. We assume that the covariates can be estimated consistently and use an iterative nonparametric kernel smoothing procedure for estimating the conditional mean...

We develop a portfolio risk model that uses high-frequency data to forecast the loss surface, which is the set of loss distributions at future time horizons. Our model uses a fully automated, semi-parametric fitting procedure that has its basis in extreme value statistics. We take account of...