There are a large number of tests for instability or breaks in coefficients in regression models designed for different possible departures from the stable model. We make two contributions to this literature. First, we consider a large class of persistent breaking processes that lead to...

Forecasts guide decisions in all areas of economics and finance and their value can only be understood in relation to, and in the context of, such decisions. We discuss the central role of the loss function in helping determine the forecaster's objectives and use this to present a unified...

Forecasts guide decisions in all areas of economics and finance and their value can only be understood in relation to, and in the context of, such decisions. We discuss the central role of the loss function in helping determine the forecaster's objectives. Decision theory provides a framework...

In situations where a sequence of forecasts is observed, a common strategy is to examine ‘rationality’ conditional on a given loss function. We examine this from a different perspective - supposing that we have a family of loss functions indexed by unknown shape parameters, then given the...

The highly prized ability to make financial plans with some certainty about the future comes from the core fields of economics. In recent years the availability of more data, analytical tools of greater precision, and ex post studies of business decisions have increased demand for information...

This paper examines the efficiency of the forward yen/dollar market using micro survey data. We first argue that the conventional tests of efficiency (unbiasedness) of the forward rate or of the survey forecasts do not correspond directly to the zero-profit condition. Instead, we use the survey...

This paper derives the asymptotic power envelope for tests of a unit autoregressive root for various trend specifications and stationary Gaussian autoregressive disturbances. A family of tests is proposed, members of which are asymptotically similar under a general 1(1) null (allowing...

It is well known that the distribution of statistics testing restrictions on the coefficients in time series regressions can depend on the order of integration of the regressors. In practice the order of integration is rarely blown. This paper examines two conventional approaches to this...

The paper analyzes the impact of the initial observation on the problem of testing for unit roots. To this end, we derive a family of optimal tests that maximize a weighted average power criterion with respect to the initial observation. We then investigate the relationship of this optimal...