A plausible explanation for cointegration among spot currency rates determined in efficient markets is the existence of a stationary, time-varying currency risk premium. Such an interpretation is contingent upon stationarity of the forward premium. However, empirical evidence on the stochastic...

This paper considers two potential rationales for the apparent absence of mean reversion in real exchange rates in the post-Bretton Woods era. We allow for (i) fractional integration and (ii) a double mean shift in the real exchange rate process. These methods, applied to CPI-based rates for 17...

Does merger and acquisition (M&A) activity occur in waves, that is, are there oscillations between low and high levels of M&A activity? The answer to this question is important in developing univariate as well as structural models of explaining and forecasting the stochastic behavior of M&A...

Under conditions of risk neutrality and rational expectations in the foreign exchange market, there should be a one-to-one relationship between the forward rate and the corresponding future spot rate. However, cointegration-based tests of the unbiasedness hypothesis of the forward rate have...

Using spectral regression and exact maximum likelihood methods, we test for long memory dynamics in the traded goods prices for the G7 countries, as measured in their import and export price indices. Significant and robust evidence of fractional dynamics with long memory features is found in...

This paper investigates the effects of permanent and transitory components of the exchange rate on firms' profitability under imperfect information. Utilizing a signal extraction framework, we show that the variances of these components of the exchange rate process will have indeterminate...

We test for stochastic long-memory behavior in the returns series of currency rates for eighteen industrial countries using a semiparametric fractional estimation method. A sensitivity analysis is also carried out to analyze the temporal stability of the long-memory parameter. Contrary to the...

We test for stochastic long memory in the Greek stock market, an emerging capital market. The fractional differencing parameter is estimated using the spectral regression method. Contrary to findings for major capital markets, significant and robust evidence of positive long-term persistence is...

The high correlation between domestic saving and investment rates in cross country regressions has been interpreted by some authors as evidence that world capital markets are not integrated. Our paper reexamines the long-run saving investment relationship across OECD countries using co...