nep-ecm New Economics Papers
on Econometrics
Issue of 2006‒06‒17
ten papers chosen by
Sune Karlsson
Orebro University

  1. Designing realised kernels to measure the ex-post variation of equity prices in the presence of noise By Ole E. Barndorff-Nielsen; Peter Reinhard Hansen; Asger Lunde; Neil Shephard
  2. Practical estimation methods for linked employer-employee data By Andrews, Martyn; Schank, Thorsten; Upward, Richard
  3. The Dynamics of Perception: Modelling subjective well-being in a short panel By Stephen Pudney
  4. Identifying True Willingness-To-Pay from a Structural Shift Model By Jeffrey Czajkowski
  5. Bayesian simultaneous determination of structural breaks and lag lengths By Hultblad, Brigitta; Karlsson, Sune
  6. Occupation Time Fluctuations of an Infinite Variance Branching System in Large Dimensions By T. Bojdecki; Luis G. Gorostiza; A. Talarczyk
  7. Generalized Method of Moments and Inverse Control. By Gregory E. Givens; Michael K. Salemi
  8. Direction-of-Change Forecasts Based on Conditional Variance, Skewness and Kurtosis Dynamics: International Evidence By Peter F. Christoffersen; Francis X. Diebold; Roberto S. Mariano; Anthony S. Tay; Yiu Kuen Tse
  9. Une Synthèse des Tests de Racine Unitaire sur Données de Panel By Christophe Hurlin; Valérie Mignon

  1. By: Ole E. Barndorff-Nielsen (University of Aarhus); Peter Reinhard Hansen (Stanford University); Asger Lunde (Aarhus School of Business); Neil Shephard (Nuffield College, University of Oxford)
    Abstract: This paper shows how to use realised kernels to carry out efficient feasible inference on the ex-post variation of underlying equity prices in the presence of simple models of market frictions. The issue is subtle with only estimators which have symmetric weights delivering consistent estimators with mixed Gaussian limit theorems. The weights can be chosen to achieve the best possible rate of convergence and to have an asymptotic variance which is close to that of the maximum likelihood estimator in the parametric version of this problem. Realised kernels can also be selected to (i) be analysed using endogenously spaced data such as that in databases on transactions, (ii) allow for market frictions which are endogenous, (iii) allow for temporally dependent noise. The finite sample performance of our estimators is studied using simulation, while empirical work illustrates their use in practice.
    JEL: C13 C22
    Date: 2006–05–31
  2. By: Andrews, Martyn; Schank, Thorsten; Upward, Richard
    Abstract: "Methods for the analysis of linked employer-employee data are not yet available in standard econometrics packages. In this paper, we make the fixed-effects methods developed orginally by Abowd, Kramarz, Margolis and others more accessible, where possible, and show how they can be implemented in Stata. To illustrate these techniques, we give an example using German linked data. There is a caveat: when the number of plants is prohibitively large and the investigator wants to estimate the correlation between the worker and firm unobserved heterogeneities, the regression-based techniques discussed are not feasible. We also report an estimate of the correlation of zero. In this version of the paper, we replace our earlier Two-Step estimator by a Classical Minimum Distance estimator." (author's abstract, IAB-Doku) ((en))
    Keywords: IAB-Linked-Employer-Employee-Datensatz, Schätzung, Datenanalyse, Software, statistische Methode
    JEL: C23 C87 J30
    Date: 2004–08–23
  3. By: Stephen Pudney (Institute for Social and Economic Research)
    Abstract: We consider the neglected issue of the dynamics of perceptions, as expressed in responses to survey questions on subjective well-being. We develop a simulated ML method for estimation for dynamic linear models, where the dependent variable is partially observed through ordinal scales. This latent autoregression (LAR) model is often more appropriate than the usual state-dependence (SD) model for attitudinal and interval variables. The paper contains an application to a model of households’ perceptions of their financial well-being, demonstrating the superior fit of the LAR model to both the usual static model and the SD model.
    Keywords: GHK simulator, bhps, dynamic panel data models, maximum simulated likelihood, ordinal variables
    Date: 2006–05
  4. By: Jeffrey Czajkowski (Department of Economics, Florida International University)
    Abstract: This paper demonstrates by way of data simulations that structural shift models designed to identify unbiased willingness-to-pay (WTP) from a double-bound dichotomous choice contingent valuation methodology fail to do so within a respondent Bayesian updating context. We show that failure of the existing structural shift models is due to identification issues, dummy variable misspecification, and incompatible priors of true WTP between researchers and respondents. We further show that much of the bias can be accounted for when the structural shift specification is extended to be a function of the presented bid amount.
    Keywords: Double-bound dichotomous choice, Structural shift models, True WTP, Bayesian updating
    JEL: Q50 Q51
    Date: 2006–06
  5. By: Hultblad, Brigitta (Dept. of Economic Statistics, Stockholm School of Economics); Karlsson, Sune (Dept. of Economics, Statistics and Informatics)
    Abstract: The detection of structural change and determination of lag lengths are long-standing issues in time series analysis. This paper demonstrates how these can be successfully married in a Bayesian analysis. By taking account of the inherent uncertainty about the lag length when deciding on the number of structural breaks and vice versa we avoid some common pitfalls and are able to draw more robust conclusions. The approach is illustrated using both real and simulated data.
    Keywords: Regime shifts; Model uncertainty; Model averaging; Markov chain Monte Carlo; Real interest rate
    JEL: C11 C15 C22 C51
    Date: 2006–06–08
  6. By: T. Bojdecki (Institute of Mathematics, University of Warsaw); Luis G. Gorostiza (Departamento de Mathematicas, Centro de Investigacion y de Estudios Avanzados, LRSP); A. Talarczyk (Institute of Mathematics, University of Warsaw)
    Abstract: We prove limit theorems for rescaled occupation time fluctuations of a (d, , )-branching particle system (particles moving in Rd according to a spherically symmetric -stable L´evy process, (1 + )- branching, 0 < < 1, uniform Poisson initial state), in the cases of critical dimension, d = (1+)/, and large dimensions, d > (1 + )/. The fluctuation processes are continuous but their limits are stable processes with independent increments, which have jumps. The convergence is in the sense of finite-dimensional distributions, and also of space-time random fields (tightness does not hold in the usual Skorohod topology). The results are in sharp contrast with those for intermediate dimensions, / < d < d(1+)/, where the limit process is continuous and has long range dependence (this case is studied by Bojdecki et al, 2005c). The limit process is measure-valued for the critical dimension, and S0(Rd)-valued for large dimensions. We also raise some questions of interpretation of the dierent types of dimension-dependent results obtained in the present and previous papers in terms of properties of the particle system.
    Keywords: Branching particle system, critical and large dimensions, limit theorem, occupation time fluctuation, stable process.
    JEL: C10 C40
    Date: 2005–11–14
  7. By: Gregory E. Givens; Michael K. Salemi
    Abstract: This paper presents a Generalized Method of Moments algorithm for estimating the structural parameters of a macroeconomic model subject to the restriction that the coefficients of the monetary policy rule minimize the central bank's expected loss function. The algorithm combines least-squares normal equations with moment restrictions derived from the first-order necessary conditions of the auxiliary optimization. We assess the performance of the algorithm with Monte Carlo simulations using three increasingly complex models. We find that imposing the optimizing restrictions when they are true improves estimation accuracy and that imposing those restrictions when they are false biases estimates of some of the structural parameters but not of the policy rule coefficients.
    Keywords: GMM, optimal monetary policy, simple rules, policy objectives
    JEL: C32 C61 E31 E32 E52 E61
    Date: 2006–06
  8. By: Peter F. Christoffersen (McGill University and CIRANO); Francis X. Diebold (Department of Economics, University of Pennsylvania); Roberto S. Mariano (Singapore Management University); Anthony S. Tay (Singapore Management University); Yiu Kuen Tse (Singapore Management University)
    Abstract: Recent theoretical work has revealed a direct connection between asset return volatility forecastability and asset return sign forecastability. This suggests that the pervasive volatility forecastability in equity returns could, via induced sign forecastability, be used to produce direction-of change forecasts useful for market timing. We attempt to do so in an international sample of developed equity markets, with some success, as assessed by formal probability forecast scoring rules such as the Brier score. An important ingredient is our conditioning not only on conditional mean and variance information, but also conditional skewness and kurtosis information, when forming direction-of-change forecasts.
    Keywords: Volatility, variance, skewness, kurtosis, market timing, asset management, asset allocation, portfolio management
    JEL: G10 G12
    Date: 2006–02–01
  9. By: Christophe Hurlin (LEO - Laboratoire d'économie d'Orleans - [CNRS : UMR6221] - [Université d'Orléans]); Valérie Mignon (CEPII - Centre d'études prospectives et d'informations internationales - [Université de Paris X - Nanterre])
    Abstract: Cet article propose une synthèse de la littérature concernant les tests de racine unitaire en panel. Deux principales évolutions peuvent être mises en évidence dans cette voie de recherche depuis les travaux fondateurs de Levin et Lin (1992). D'une part, on a pu assister depuis la fin des années 90 à une évolution tendant à prendre en compte une hétérogénéité des propriétés dynamiques des séries étudiées, avec notamment les travaux d'Im, Pesaran et Shin (1997) et de Maddala et Wu (1999). D'autre part, un second type de développements récents dans cette littérature tend à introduire une dichotomie entre deux générations de tests : la première génération repose sur une hypothèse d'indépendance entre les individus, ce qui apparaît peu plausible notamment dans le cas de certaines applications macro-économiques. La seconde génération, actuellement en plein développement, intègre diverses formes possibles de dépendances inter-individuelles (Bai et Ng (2001), Phillips et Sul (2003a), Moon et Perron (2004), Choi (2002), Pesaran (2003) et Chang (2002)). Ces deux générations de tests sont présentées dans cette revue de la littérature.
    Keywords: Données de panel non stationnaires, racine unitaire, hétérogénéité, dépendances inter-individuelles
    Date: 2006–06–08
  10. By: F. Alfonso Arellano Espinar (Universidad de Alicante)
    Abstract: The paper provides a review of the methodology of Survival Analysis and Causal Inference in the labour market context. This literature has been used to analyse and study the effects of (active) labour market policies adopted during the last years. Determining factors of the literature are also analysed: the types of data bases, the makeup of treatment and control groups, and the outcome variables. Kaplan-Meier (non-parametric) estimates and duration models constitute the main instruments in Survival Analysis. Causal Inference focuses on Matching methods, Difference-in Difference method and Instrumental Variables procedure to determine the causal effect of a policy. Se ofrece en este artículo una revisión de la metodología sobre Análisis de Supervivencia e Inferencia Causal en el ámbito del mercado de trabajo. Esta literatura se ha utilizado para analizar y estudiar los efectos de las medidas laborales que se han adoptado en los últimos años en diversas economías. Se analizan los factores determinantes de esta literatura, como son la naturaleza de las bases de datos, y la constitución de los grupos de tratamiento y de control y la variable objeto de estudio. Mientras las estimaciones no paramétricas de Kaplan y Meier y los modelos de duración constituyen los principales instrumentos en el Análisis de Supervivencia, en la Inferencia Causal se utilizan los métodos de emparejamiento, de diferencias en diferencias y variables instrumentales para determinar el efecto causal de una política.
    Keywords: Inferencia Causal, Análisis de Supervivencia, Políticas Activas de Empleo Causal Inference, Survival Analysis, Active labour market policies.
    JEL: C13 C14 C41 J18
    Date: 2006–06

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