This paper proposes a test for linearity against exponential smooth transition models with endogenous right-hand-side variables: to the very best of our knowledge, this class of models is new to the literature. By Monte Carlo analysis the test is shown to have good finite sample properties

We develop a Wald type test to distinguish between long memory and ESTAR nonlinearity by using a directed-Wald statistic to overcome the problem of restricted parameters under the alternative. The test is derived from two basic model specifications where the first is the standard model based on...

By combining two alternative formulations of a test statistic with two alternative resamplingschemes we obtain four different bootstrap tests. In the context of static linear regression modelstwo of these are shown to have serious size and power problems, whereas the remaining two areadequate...

This paper develops tests of the null hypothesis of linearity in the context of autoregressive models with Markov-switching means and variances. These tests are robust to the identification failures that plague conventional likelihood-based inference methods. The approach exploits the moments of...

This paper develops tests of the null hypothesis of linearity in the context of autoregressive models with Markov-switching means and variances. These tests are robust to the identification failures that plague conventional likelihood-based inference methods. The approach exploits the moments of...

We are occupied with a simple example concerning the limit theory of the OLSE when the innovation process of the regression has the form of a martingale transform the i.i.d. part of which lies in the domain of attraction of an \alpha-stable distribution, the scalling sequence has a potentially...

Applied researchers often test for the difference of the Sharpe ratios of two investment strategies. A very popular tool to this end is the test of Jobson and Korkie (1981), which has been corrected by Memmel (2003). Unfortunately, this test is not valid when returns have tails heavier than the...

In this paper we investigate the properties of the Lagrange Multiplier (LM) test for autoregressive conditional heteroskedasticity (ARCH) and generalized ARCH (GARCH) in the presence of additive outliers (AO's). We show analytically that both the asymptotic size and power are adversely affected...

Fund-of-funds (FoF) managers face the task of selecting a (relatively) small number of hedge funds from a large universe of candidate funds. We analyse whether such a selection can be successfully achieved by looking at the track records of the available funds alone, using advanced statistical...

The detection and location of additive outliers in integrated variables has attracted much attention recently because such outliers tend to affect unit root inference among other things. Most of these procedures have been developed for non-seasonal processes. However, the presence of seasonality...