In cointegration analysis, when considering a hypothesis of the kind beta =(H_1*phi_1,...,H_n*phi_n) the estimator is a simple switching method that requires starting values. We propose using additional restrictions, then solutions of an eigenvector problem may be used as starting values. Using...

This paper applies the maximum likelihood panel cointegration method of Larsson and Lyhagen (2007) to test the strong PPP hypothesis using data for the G7 countries. This method is robust in several important dimensions relative to previous methods, including the well-known issue of...

Based on 58,256 news articles published in the Financial Times during a 15-year period that cover companies in the DJIA, we find that a trading strategy that longs stocks with the most negative news and shorts stocks with the least negative news is not profitable. Consistent with this result, we...

We introduce a new approximation method for the distribution of functions of random variables that are real-valued. The approximation involves moment matching and exploits properties of the class of normal inverse Gaussian distributions. In the paper we examine the how well the different...

Here we present a general framework for a GARCH (1,1) type of process with innovations with a probability law of the mean- variance mixing type, therefore we call the process in question the mean variance mixing GARCH \ (1,1) or MVM GARCH\(1,1). One implication is a GARCH\ model with skewed...

Our objective is volatility forecasting, which is core to many risk management problems. We provide theoretical explanations for (i) the empirical stylized fact recognized at least since Taylor (1986) and Ding, Granger, and Engle (1993) that absolute returns show more persistence than squared...

This paper bridges the gap between traditional ARCH modelling and recent advances on realized volatilities. Based on a ten-year sample of five-minute returns for the ECU basket currencies versus the US dollar, we find that the realized volatilities constructed from the summation of the...