In this paper, we develop the asymptotic theory of Hwang and Basawa (2005) for explosive random coefficient autoregressive (ERCA) models. Applying the theory, we prove that a locally best invariant (LBI) test in McCabe and Tremayne (1995), which is for the null of a unit root (UR) process...

This paper investigates the spurious effect in forecasting asset returns when signals from technical trading rules are used as predictors. Against economic intuition, the simulation result shows that, even if past information has non predictive power, buy or sell signals based on the difference...

Conventionally, shocks to permanent and transitory components in the unobserved components (UC) model for the log of real GDP are assumed to be uncorrelated. This assumption is mainly for identification of model parameters. In this paper, we show important implications of two popular measures of...

Information matrix (IM) test (White, 1982) has been used for detecting general model misspecification in the applied econometrics literature. Two of the most commonly used asymptotic covariance matrix estimators (ACMEs) for the IM test are the one that White (1982) proposed in his original paper...

In this note, I show that the ordered and sequential probit models are special cases of the multinomial probit model where the disturbance terms in the latent variables degenerate or those variances converge to zero at a certain rate.