What is Statistics? Opinions vary. In fact, there is a continuous spectrum of attitudes toward statistics ranging from pure theoreticians, proving asymptotic efficiency and searching for most powerful tests, to wild practitioners, blindly reporting p-values and claiming statistical significance...

In this paper we first investigate the validity of a general Value at Risk approach, which is widely used for risk management in banking and insurance companies. We discuss and widely reject the conventional assumptions, e.g. independent identically distributed normal returns, and as consequence...

We compare more than 1000 different volatility models in terms of their fit to the historical ISE-100 Index data and their forecasting performance of the conditional variance in an out-of-sample setting. Exponential GARCH model of Nelson (1991) with “constant mean, t-distribution, one lag...

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 consider two likelihood ratio tests, so-called maximum eigenvalue and trace tests, for the null of no cointegration when fractional cointegration is allowed under the alternative, which is a first step to generalize the so-called Johansen's procedure to the fractional cointegration case. The...

The topic of this paper is inference in models in which parameters are defined by moment inequalities and/or equalities. The parameters may or may not be identified. This paper introduces a new class of confidence sets and tests based on generalized moment selection (GMS). GMS procedures are...

We study the problem of estimating the parameters of a linear median regression without any assumption on the shape of the error distribution -- including no condition on the existence of moments -- allowing for heterogeneity (or heteroskedasticity) of unknown form, noncontinuous distributions,...

We present a new robust bootstrap method for a test when there is a nuisance parameter under the alternative, and some parameters are possibly weakly or non-identified. We focus on a Bierens (1990)-type conditional moment test of omitted nonlinearity for convenience, and because of difficulties...

Numerical standard error (NSE) is an estimate of the standard deviation of a simulation result if the simulation experiment were to be repeated many times. We review standard methods for computing NSE, and perform a Monte Carlo experiments to compare their performance in the case of high/extreme...

This paper investigates the finite sample properties of the widely-used Gibbons, Ross, Shanken (1989) (GRS) test in the presence of both conditional correlation and conditional heteroskedasticity. It finds that the GRS test exhibits serious size distortions resulting in potentially misleading...