Performance of unit root tests depends on several specification decisions prior to their application, e.g., whether or not to include a deterministic trend. Since there is no standard procedure for making such decisions; therefore, the practitioners routinely make several arbitrary specification...

Performance of unit tests depends on several specification decisions prior to their application e.g., whether or not to include a deterministic trend. Since there is no standard procedure for making such decisions, therefore the practitioners routinely make several arbitrary specification...

In this paper we highlight the necessity of new criteria for evaluation of performance of unit root tests. We suggest focusing directly on the reasons that create ambiguity in unit root test’s results. Two reasons for unsatisfactory properties of unit root tests can be found in the literature...

Being able to correctly characterise an observed time series into its separate difference stationary and trend stationary regimes, should they exist, has important implications for effective model building and forecasting in economics and finance. Existing ratio-based statistics test the null...

Although difference-stationary (DS) and trend-stationary (TS) processes have been subject to considerable analysis, there are no direct comparisons for each being the data-generation process (DGP). We examine incorrect choice between these models for forecasting for both known and estimated...

It has been suggested that existing estimates of the long-run impact of a surprise move in income may have a substantial upward bias due to the presence of a trend break in 1970s (1350s) and 1980s (1360s) gross domestic product (contained oil) data of Iran. This article shows that the...

The globalisation on financial markets and the development of financial derivatives has increased not only chances but also potential risk within the banking industry. Especially market risk has gained major significance since market price variation of interest rates, stocks or exchange rates...

Literature shows that the regression of independent and (nearly) nonstationary time series could result in spurious outcomes. In this paper, we conjecture that under some situations, the regression of two independent and nearly non-stationary series does not have any spurious problem at all. To...

The globalisation on financial markets and the development of financial derivatives has increased not only chances but also potential risk within the banking industry. Especially market risk has gained major significance since market price variation of interest rates, stocks or exchange rates...

We simulate a simplified version of the price process including bubbles and crashes proposed in Kreuser and Sornette (2018). The price process is defined as a geometric random walk combined with jumps modelled by separate, discrete distributions associated with positive (and negative) bubbles....