Several recent papers have studied the impact of macroeconomic shocks on the financial policies of firms. However, they only consider the case where these macroeconomic shocks affect the profitability of firms but not the financial markets conditions. We study the polar case where the...

This paper presents econometric evidence on whether the founding of the Federal Reserve in 1914 caused a structural change from level-stationarity to difference-stationarity in U.S. and U.K. short-term nominal interest rates. We develop new econometric tests that allow for parameter transitions...

Recent research has noted that the change in the shape of the yield curve can serve as a proxy for economic activity and contains economic information not present in other explanatory variables. This article extends previous research by examining the combined effect of changes in the shape of...

Persistent regressors pose a common problem in predictive regressions. Tests of the forward rate unbiased hypothesis (FRUH) constitute a prime example. Standard regression tests that strongly reject FRUH have been questioned on the grounds of potential long-memory in the forward premium....

Evidence in favour of long memory has recently been questioned by tests that allow for structural breaks. This article tests for periodic breaks in the unconditional variance of stock return data on eight UK sectors, as well as the market index. Using the modified Iterative Cumulative Sum of...

This article examines the issue of stock returns forecasting and in particular extends the analysis of the recently introduced sum of the parts modelling technique. The sum of the parts technique undertakes a first-stage regression analysis where the predictor variables themselves are estimated...