In this paper a new GARCH–M type model, denoted the GARCH-AR, is proposed. In particular, it is shown that it is possible to generate a volatility-return trade-off in a regression model simply by introducing dynamics in the standardized disturbance process. Importantly, the volatility in the...

Nonlinearities in the drift and diffusion coefficients influence temporal dependence in scalar diffusion models. We study this link using two notions of temporal dependence: beta-mixing and rho-mixing. We show that beta-mixing and rho-mixing with exponential decay are essentially equivalent...

Recent literature shows that embedding fractionally integrated time series models with spectral poles at the long-run and/or seasonal frequencies in autoregressive frameworks leads to estimators and test statistics with non-standard limiting distributions that must be simulated on a case-by-case...

In the present paper we propose a new method, the Penalized Adaptive Method (PAM), for a data driven detection of structural changes in sparse linear models. The method is able to allocate the longest homogeneous intervals over the data sample and simultaneously choose the most proper variables...

When a pair of independent series are highly persistent, there is a spurious regression bias in a regression between these series, closely related to the classic studies of Granger and Newbold [1974]. Although this is well known to occur with independent I(1) processes, this paper provides...

Two of the most important stylized facts well-known in finance relate to the non-Gaussian distribution and to the volatility clustering of stock returns. In this paper, we show that a new class of stochastic processes – called Multifractional Processes with Random Exponent (MPRE) – can...

This article addresses unit root testing on regulated series through the variance ratio (VR) statistic of Nielsen (2009). The asymptotic distribution of the regulated VR statistic is developed with and without OLS detrending. Results of Cavaliere and Xu (2011) are extended by also developing the...