This paper examines the transmission of shocks between the US, Japanese and Australian equity markets. Tests for the existence of linear and non-linear transmission of volatility across the markets are performed using parametric and non-parametric techniques.

We study the effects of growth volatility and inflation volatility on average rates of output growth and inflation for postwar U.S. data in a multivariate asymmetric GARCH-M model. Our statistical model differs from other work in that we allow the conditional covariance of inflation and growth...

The usual measure of the undiversifiable risk of a portfolio is its beta. Recent research has allowed beta estimates to vary over time, often based on symmetric multivariate GARCH models. There is, however, widespread evidence in the literature that the volatilities of asset returns, in...

Research by Ghali (1999) tested for the existence of causality between wages and prices in United States' aggregate data using a multivariate cointegration framework. We show that Ghali's model is misspecified and that the correct specification leads to a different interpretation of the long-run...

This paper considers the extent to which fluctuations in Australian economic growth are affected by domestic and overseas economic performance. We investigate the performance of a range of non-linear models versus linear models using Bayes factors and posterior odds ratios. The posterior odds...

Unit root and stationarity test suggest that shocks to quarterly US, Japanese and UK inflation are infinitely persistent. Recently developed test based on threshold autoregressions are used to distinguish between non-stationarity and non-linearity. The evidence suggests that inflation is well...

Empirical evidence documents a level effect in the volatility of short term rates of interest. That is, volatility is positively correlated with the level of the short term interest rate. Using Monte-Carlo simulations this paper examines the performance of the commonly used Engle-Ng (1993) tests...

The Fisher equation predicts that nominal interest rates and inflation should move together one-for-one. Recently published work argues that both nominal interest rates and inflation are non-linear. The evidence in this paper suggests that nominal interest rates are well described as two-regime...

A number of recent papers have employed the BDS test as a general test for mis-specification for linear and nonlinear models. We show that for a particular class of conditionally heteroscedastic models, the BDS test is unable to detect a common mis-specification. Our results also demonstrate...

There is much evidence in the literature that the volatility of asset returns, in particular those from stock markets, show evidence of an asymmetric response to good and bad news. This paper considers the impact of news on time varying hedges for financial futures. The models are compared with...