
on Econometrics 
By:  Einmahl, John (Tilburg University, Center For Economic Research); Kiriliouk, A.; Segers, J.J.J. (Tilburg University, Center For Economic Research) 
Abstract:  Likelihoodbased procedures are a common way to estimate tail dependence parameters.They are not applicable, however, in nondifferentiable models such as those arising from recent maxlinear structural equation models. Moreover, they can be hard to compute in higher dimensions. An adaptive weighted leastsquares procedure matching nonparametric estimates of the stable tail dependence function with the corresponding values of a parametrically specified proposal yields a novel minimumdistance estimator. The estimator is easy to calculate and applies to a wide range of sampling schemes and tail dependence models. In large samples, it is asymptotically normal with an explicit and estimable covariance matrix. The minimum distance obtained forms the basis of a goodnessoft statistic whose asymptotic distribution is chisquare. Extensive Monte Carlo simulations confirm the excellent finitesample performance of the estimator and demonstrate that it is a strong competitor to currently available methods. The estimator is then applied to disentangle sources of tail dependence in European stock markets. 
Keywords:  Brownresnick process; extremal coefficient; maxlinear model; multivariate extremes; stable tail dependence function 
JEL:  C13 C14 
Date:  2016 
URL:  http://d.repec.org/n?u=RePEc:tiu:tiucen:a3e7350b47734bd89c3c6bc485b83f4d&r=ecm 
By:  Jakob Guldbæk Mikkelsen (Aarhus University and CREATES); Eric Hillebrand (Aarhus University and CREATES); Giovanni Urga (Cass Business School) 
Abstract:  In this paper, we develop a maximum likelihood estimator of timevarying loadings in highdimensional factor models. We specify the loadings to evolve as stationary vector autoregressions (VAR) and show that consistent estimates of the loadings parameters can be obtained by a twostep maximum likelihood estimation procedure. In the first step, principal components are extracted from the data to form factor estimates. In the second step, the parameters of the loadings VARs are estimated as a set of univariate regression models with timevarying coefficients. We document the finitesample properties of the maximum likelihood estimator through an extensive simulation study and illustrate the empirical relevance of the timevarying loadings structure using a large quarterly dataset for the US economy. 
Keywords:  Highdimensional factor models, dynamic factor loadings, maximum likelihood, principal components JEL classification: C33, C55, C13 
Date:  2015–12–15 
URL:  http://d.repec.org/n?u=RePEc:aah:create:201561&r=ecm 
By:  Jaydip Sen; Tamal Datta Chaudhuri 
Abstract:  With the rapid development and evolution of sophisticated algorithms for statistical analysis of time series data, the research community has started spending considerable effort in technical analysis of such data. Forecasting is also an area which has witnessed a paradigm shift in its approach. In this work, we have used the time series of the index values of the Auto sector in India during January 2010 to December 2015 for a deeper understanding of the behavior of its three constituent components, e.g., the Trend, the Seasonal component, and the Random component. Based on this structural analysis, we have also designed three approaches for forecasting and also computed their accuracy in prediction using suitably chosen training and test data sets. The results clearly demonstrate the accuracy of our decomposition results and efficiency of our forecasting techniques, even in presence of a dominant Random component in the time series. 
Date:  2016–01 
URL:  http://d.repec.org/n?u=RePEc:arx:papers:1601.02407&r=ecm 
By:  Athanasopouolos, George (Monash University); Poskitt, Don (Monash University); Vahid, Farshid (Monash University); Yao, Wenying (School of Business and Economics, University of Tasmania) 
Abstract:  This article studies error correction vector autoregressive moving average (ECVARMA) models. A complete procedure for identifying and estimating ECVARMA models is proposed. The cointegrating rank is estimated in the first stage using an extension of the nonparametric method of Poskitt (2000). Then, the structure of the VARMA model for variables in levels is identified using the scalar component model (SCM) methodology developed in Athanasopoulos and Vahid (2008), which leads to a uniquely identifiable VARMA model. In the last stage, the VARMA model is estimated in its error correction form. Monte Carlo simulation is conducted using a 3dimensional VARMA(1,1) DGP with cointegrating rank 1, in order to evaluate the forecasting performances of the ECVARMA models. This algorithm is illustrated further using an empirical example of the term structure of U.S. interest rates. The results reveal that the outofsample forecasts of the ECVARMA model are superior to those produced by error correction vector autoregressions (VARs) of finite order, especially in short horizons. 
Keywords:  cointegration, VARMA model, iterative OLS, scalar component modelNote: 
JEL:  C1 C32 C53 
Date:  2014–02–22 
URL:  http://d.repec.org/n?u=RePEc:tas:wpaper:17835&r=ecm 
By:  Giuseppe Cavaliere (Università di Bologna); Iliyan Georgiev (Università di Bologna); Robert Taylor (University of Essex) 
Abstract:  The contribution of this paper is twofold. First, we derive the asymptotic null distribution of the familiar augmented DickeyFuller [ADF] statistics in the case where the shocks follow a linear process driven by in…nite variance innovations. We show that these distributions are free of serial correlation nuisance parameters but depend on the tail index of the in…nite variance process. These distributions are shown to coincide with the corresponding results for the case where the shocks follow a …nite autoregression, provided the lag length in the ADF regression satis…es the same o(T1=3) rate condition as is required in the …nite variance case. In addition, we establish the rates of consistency and (where they exist) the asymptotic distributions of the ordinary least squares sieve estimates from the ADF regression. Given the dependence of their null distributions on the unknown tail index, our second contribution is to explore sieve wild bootstrap implementations of the ADF tests. Under the assumption of symmetry, we demonstrate the asymptotic validity (bootstrap consistency) of the wild bootstrap ADF tests. This is done by establishing that (conditional on the data) the wild bootstrap ADF statistics attain the same limiting distribution as that of the original ADF statistics taken conditional on the magnitude of the innovations. 
Keywords:  Bootstrap, Unit roots, Sieve autoregression, Infinite variance, Time Series 
Date:  2016 
URL:  http://d.repec.org/n?u=RePEc:bot:quadip:wpaper:130&r=ecm 
By:  Richard H. Spady; Sami Stouli 
Abstract:  We propose an alternative (‘dual regression’) to the quantile regression process for the global estimation of conditional distribution functions under minimal assumptions. Dual regression provides all the interpretational power of the quantile regression process while largely avoiding the need for ‘rearrangement’ to repair the intersecting conditional quantile surfaces that quantile regression often produces in practice. Our approach relies on a mathematical programming characterization of conditional distribution functions which, in its simplest form, provides a simultaneous estimator of location and scale parameters in a linear heteroscedastic model. The statistical properties of this estimator are derived. 
Keywords:  Conditional distribution, Stochastic representation, Duality, Convexity, Quantile regression, Heteroscedasticity, Method of moments, Mathematical programming, Monotone approximation. 
Date:  2016–01–13 
URL:  http://d.repec.org/n?u=RePEc:bri:uobdis:16/669&r=ecm 
By:  KUROZUMI, Eiji 
Abstract:  This paper proposes monitoring tests for parameter change in linear regression models with endogenous regressors. We consider a CUSUMtype test based on the instrumental variable (IV) estimation, as the IV method is standard for models with endogenous regressors. In addition, we propose a test based on the residuals from the least squares (LS) estimation. We show that for a given boundary function, both tests have the same limiting distribution under the null hypothesis, whereas their powers are different. In particular, when a structural change occurs early in a monitoring period, the test based on the LS method tends to detect it more rapidly than that based on the IV method. We apply our methods to investigate the Japanese Phillips curve and show that the LS based test performs well to detect a change in 2007, while neither test finds evidence of a change after 2013. 
Keywords:  structural change, CUSUM test, instrumental variable, Phillips curve 
JEL:  C12 C22 C26 
Date:  2016–01–20 
URL:  http://d.repec.org/n?u=RePEc:hit:econdp:201601&r=ecm 
By:  Wieladek, Tomasz (Bank of England) 
Abstract:  Interacted panel VAR (IPVAR) models allow coefficients to vary as a deterministic function of observable country characteristics. The varying coefficient Bayesian panel VAR generalises this to the stochastic case. As an application of this framework, I examine if the impact of commodity price shocks on consumption and the CPI varies with the degree of exchange rate, financial, product and labour market liberalisation on data from 1976 Q1–2006 Q4 for 18 OECD countries. The confidence bands are smaller in the deterministic case and as a result most of the characteristics affect the transmission mechanism in a statistically significant way. But only financial liberalisation is an important determinant of commodity price shocks in the stochastic case. This suggests that results from IPVAR models should be interpreted with caution. 
Keywords:  Bayesian panel VAR; commodity price shocks 
JEL:  C33 E30 
Date:  2016–01–08 
URL:  http://d.repec.org/n?u=RePEc:boe:boeewp:0578&r=ecm 
By:  Mauro Bernardi; Leopoldo Catania 
Abstract:  Signals coming from multivariate higher order conditional moments as well as the information contained in exogenous covariates, can be effectively exploited by rational investors to allocate their wealth among different risky investment opportunities. This paper proposes a new flexible dynamic copula model being able to explain and forecast the timevarying shape of large dimensional asset returns distributions. Moreover, we let the univariate marginal distributions to be driven by an updating mechanism based on the scaled score of the conditional distribution. This framework allows us to introduce timevariation in up to the fourth moment of the conditional distribution. The timevarying dependence pattern is subsequently modelled as function of a latent Markov Switching process, allowing also for the inclusion of exogenous covariates in the dynamic updating equation. We empirically assess that the proposed model substantially improves the optimal portfolio allocation of rational investors maximising their expected utility. 
Date:  2016–01 
URL:  http://d.repec.org/n?u=RePEc:arx:papers:1601.05199&r=ecm 
By:  Marc Hallin; Miroslav Šiman 
Date:  2016–01 
URL:  http://d.repec.org/n?u=RePEc:eca:wpaper:2013/224753&r=ecm 
By:  Harris, David; Leybourne, Stephen J; Taylor, A M Robert 
Abstract:  In this paper we consider the problem of testing for the cointegration rank of a vector autoregressive process in the case where a trend break may potentially be present in the data. It is known that unmodelled trend breaks can result in tests which are incorrectly sized under the null hypothesis and inconsistent under the alternative hypothesis. Extant procedures in this literature have attempted to solve this inference problem but require the practitioner to either assume that the trend break date is known or to assume that any trend break cannot occur under the cointegration rank null hypothesis being tested. These procedures also assume the autoregressive lag length is known to the practitioner. All of these assumptions would seem unreasonable in practice. Moreover in each of these strands of the literature there is also a presumption in calculating the tests that a trend break is known to have happened. This can lead to a substantial loss in finite sample power in the case where a trend break does not in fact occur. Using information criteria based methods to select both the autoregressive lag order and to choose between the trend break and no trend break models, using a consistent estimate of the break fraction in the context of the former, we develop a number of procedures which deliver asymptotically correctly sized and consistent tests of the cointegration rank regardless of whether a trend break is present in the data or not. By selecting the no break model when no trend break is present, these procedures also avoid the potentially large power losses associated with the extant procedures in such cases. 
Keywords:  Cointegration rank; vector autoregression; errorcorrection model; trend break; break point estimation; information criteria 
Date:  2016–01 
URL:  http://d.repec.org/n?u=RePEc:esy:uefcwp:15847&r=ecm 
By:  Jonas Hallgren; Timo Koski 
Abstract:  Continuous time Bayesian networks are investigated with a special focus on their ability to express causality. A framework is presented for doing inference in these networks. The central contributions are a representation of the intensity matrices for the networks and the introduction of a causality measure. A new model for highfrequency financial data is presented. It is calibrated to market data and by the new causality measure it performs better than older models. 
Date:  2016–01 
URL:  http://d.repec.org/n?u=RePEc:arx:papers:1601.06651&r=ecm 