The first contribution of this paper, in following the works of Lettau and Ludvigson (2001a,b), is to construct a Japanese consumption–wealth ratio data series and to examine whether it explains Japanese stock market data. We find that the consumption–wealth ratio does predict future stock...

In this paper, we propose a new approach to test the hypothesis of long-run Granger non-causality in cointegrated systems. We circumvent the problem of singularity of the variance-covariance matrix associated with the usual Wald type test by proposing a generalized inverse procedure, and an...

It is widely recognized that taking cointegration relationships into consideration is useful in forecasting cointegrated processes. However, there are a few practical problems when forecasting large cointegrated processes using the well-known vector error correction model. First, it is hard to...

In this paper, we analytically investigate three efficient estimators for cointegrating regression models: Phillips and Hansen's (1990) fully modified OLS estimator, Park's (1992) canonical cointegrating regression estimator, and Saikkonen's (1991) dynamic OLS estimator. First, by the Monte...

In this paper, Mallows'(1973) Cp criterion, Akaike's (1973) AIC, Hurvich and Tsai's (1989) corrected AIC and the BIC of Akaike (1978) and Schwarz (1978) are derived for the leads-and-lags cointegrating regression. Deriving model selection criteria for the leads-and-lags regression is a...

In general, Wald tests for the Granger non-causality in vector autoregressive (VAR) process are known to have non-standard asymptotic properties for cointegrated systems. However, that may have standard asymptotic properties depending on the rank of the submatrix of cointegration. In this paper,...

In this paper, we consider the role of "leads" of the first difference of integrated variables in the dynamic OLS estimation of cointegrating regression models. We demonstrate that the role of leads is related to the concept of Granger causality and that in some cases leads are unnecessary in...

This paper considers a single equation cointegrating model and proposes the locally best invariant and unbiased (LBIU) test for the null hypothesis of cointegration. We derive the asymptotic local power functions and compare them with the standard residualbased test, and we show that the LBIU...