Granger causality tests are widely used in applied economics as a way of establishing if a variable has been a leading indicator of another over the past. However, like most statistical tests, Granger causality tests require that the relationship between the variables remains stable over the...

We show that the minimum description length (MDL) criterion widely used to estimate lin- ear change-point (CP) models corresponds to the marginal likelihood of a Bayesian model with a specific class of prior distributions. This allows for results from the frequentist and Bayesian literatures to...

Change-point processes are one flexible approach to model long time series. We propose a method to uncover which model parameter truly vary when a change-point is detected. Given a set of breakpoints, we use a penalized likelihood approach to select the best set of parameters that changes over...

The multiple testing problem plagues many important issues in finance such as fund and factor selection. Many look good purely by luck. There are a number of statistical techniques to control for multiplicity that reduce Type I errors - but it is unknown by how much. We propose a new way to...

This article provides an introduction to methods and challenges underlying application of the bootstrap in econometric modelling of economic and financial time series. Validity, or asymptotic validity, of the bootstrap is discussed as this is a key element in deciding whether the bootstrap is...

We show that the parameters of the DCC-GARCH model, proposed by Engle (2001) and by Engle and Sheppard (2001), can be derived from the estimated parameters of a VARMA model of the average conditional correlation process. This makes their estimation much easier

This paper proposes a parsimonious approach to test non-linear dependence on the conditional mean and variance of hedge funds with respect to several market factors. My approach introduces non-linear dependence by means of empirically relevant polynomial functions of the factors. For comparison...

Multicointegration, in the sense of Granger and Lee (1990), frequently occurs in models of stock-flow adjustment and implies cointegration amongst I(2) variables and their differences (polynomial cointegration). The purpose of this article is two-fold. First, we demonstrate that based on a...

By an application of the theory of optimal estimating function, optimal instruments for dynamic models with conditional moment restrictions are derived. The general efficiency bound is provided, along with estimators attaining the bound. It is demonstrated that the optimal estimators are always...

We show that many existing tests for time-series predictability are special cases of a general nonparametric test based on the OLS estimator of the slope coefficient in a bivariate linear regression of certain type. By manipulating the features of this regression one can construct numerous new...