Using the power kernels of Phillips, Sun and Jin (2006, 2007), we examine the large sample asymptotic properties of the t-test for different choices of power parameter (rho). We show that the nonstandard fixed-rho limit distributions of the t-statistic provide more accurate approximations to the...

In empirical work on multivariate financial time series, it is common to postulate a Multivariate GARCH model. We show that the popular Gaussian quasi-maximum likelihood estimator of MGARCH models is very sensitive to outliers in the data. We propose to use robust M-estimators and provide...

We propose a novel generalization to the Student-t Probabilistic Principal Component methodology which: (1) accounts for an asymmetric distribution of the observation data; (2) is a framework for grouped and generalized multiple-degree-of-freedom structures, which provides a more flexible...

The GMM estimator that is usually employed in the panel data literature, has an unbounded influence function. This means that the estimator is easily influenced by outliers in the data. This paper develops a variant of the GMM estimator that is less sensitive to anomalous observations....

In this paper, we develop a new asymptotic theory of the long run variance estimator obtained by fitting a vector autoregressive model to the transformed moment processes in a GMM framework. In contrast to the conventional asymptotics where the VAR lag order p goes to infinity but at a slower...

The paper develops a novel testing procedure for hypotheses on deterministic trends in a multivariate trend stationary model. The trends are estimated by the OLS estimator and the long run variance (LRV) matrix is estimated by a series type estimator with carefully selected basis functions....

The paper presents an empirical study designed to test a small area estimation method. The aim of the study is to apply a robust version of the Fay-Herriot model to the estimation of average wages in the small business sector. Unlike the classical Fay-Herriot model, its robust version makes it...

Portfolio sorting is ubiquitous in the empirical finance literature, where it has been widely used to identify pricing anomalies in different asset classes. Despite the popularity of portfolio sorting, little attention has been paid to the statistical properties of the procedure or to the...

We define risk spillover as the dependence of a given asset variance on the past covariances and variances of other assets. Building on this idea, we propose the use of a highly flexible and tractable model to forecast the volatility of an international equity portfolio. According to the risk...

This study uses a comprehensive data set of VIX and CDS markets to propose pairs trading strategies that represent the dynamic relation between market risk and credit risk in an equilibrium framework with a common non stationary factor. This involves the analysis of price discovery between VIX...