This paper analyzes volatility spillovers in multivariate GARCH-type models. We show that the cross-effects between the conditional variances determine the persistence of the transmitted volatility innovations. In particular, the effect of a foreign volatility innovation on a conditional...

This paper analyzes volatility spillovers in multivariate GARCH-type models. We show that the cross-effects between the conditional variances determine the persistence of the transmitted volatility innovations. In particular, the influence of a foreign volatility innovation on a conditional...

Common approaches to test for the economic value of directional forecasts are based on the classical Chi-square test for independence, Fisher’s exact test or the Pesaran and Timmerman (1992) test for market timing. These tests are asymptotically valid for serially independent observations....

Divergent priors are improper when defined on unbounded supports. Bartlett's paradox has been taken to imply that using improper priors results in ill-defined Bayes factors, preventing model comparison by posterior probabilities. However many improper priors have attractive properties that...

A Bayesian model averaging procedure is presented that makes use of a finite mixture of many model structures within the class of vector autoregressive (VAR) processes. It is applied to two empirical issues. First, stability of the Great Ratios in U.S. macro-economic time series is investigated,...

The failure to describe the time series behaviour of most realexchange rates as temporary deviations from fixedlong-term means may be due to time variation of the equilibriathemselves, see Engel (2000). We implement thisidea using an unobserved components model and decompose theobservations on...

The empirical support for a real business cycle model with two technology shocks is evaluated using a Bayesian model averaging procedure. This procedure makes use of a finite mixture of many models within the class ofvector autoregressive (VAR) processes. The linear VAR model is extendedto...