nep-ets New Economics Papers
on Econometric Time Series
Issue of 2006‒11‒12
six papers chosen by
Yong Yin
SUNY at Buffalo

  1. Non-Gaussian dynamic Bayesian modelling for panel data By Juarez, Miguel A.; Steel, Mark F. J.
  2. A complementary test for ADF test with an application to the exchange rates returns By Liew, Venus Khim-Sen; Lau, Sie-Hoe; Ling, Siew-Eng
  3. Economic and Financial Crises and the Predictability of U.S. Stock Returns By Hartmann, Daniel; Kempa, Bernd; Pierdzioch, Christian
  4. International Equity Flows and the Predictability of U.S. Stock Returns By Hartmann, Daniel; Pierdzioch, Christian
  5. Nonlinearly testing for a unit root in the presence of a break in the mean By Gluschenko, Konstantin
  6. Changes in the International Comovement of Stock Returns and Asymmetric Macroeconomic Shocks By Kizys, Renatas; Pierdzioch, Christian

  1. By: Juarez, Miguel A.; Steel, Mark F. J.
    Abstract: A first order autoregressive non-Gaussian model for analysing panel data is proposed. The main feature is that the model is able to accommodate fat tails and also skewness, thus allowing for outliers and asymmetries. The modelling approach is to gain sufficient flexibility, without sacrificing interpretability and computational ease. The model incorporates individual effects and we pay specific attention to the elicitation of the prior. As the prior structure chosen is not proper, we derive conditions for the existence of the posterior. By considering a model with individual dynamic parameters we are also able to formally test whether the dynamic behaviour is common to all units in the panel. The methodology is illustrated with two applications involving earnings data and one on growth of countries.
    Keywords: autoregressive modelling; growth convergence; individual effects; labour earnings; prior elicitation; posterior existence; skewed distributions
    JEL: C11 C23
    Date: 2006–07
  2. By: Liew, Venus Khim-Sen; Lau, Sie-Hoe; Ling, Siew-Eng
    Abstract: This study shows that augmented Dickey-Fuller (ADF) test failed to detect covariance nonstationary series. Supportive of Ahamada (2004), this study finds that the cumulative sums of squares procedure in Inclán and Tiao (1994) is useful to complement the ADF test. As illustration, the ADF test indicates that there is no unit root in the returns of Japanese yen/US dollar, British pound/ US dollar and Swiss franc/US. However, the complementary test reveals that each of these returns contains heterogeneous variance. To sum, it can be concluded that these exchange rate returns are covariance nonstationary although there is no unit root.
    Keywords: cumulative sums of squares; covariance nonstationary; exchange rate returns
    JEL: C22 F31 C12
    Date: 2005
  3. By: Hartmann, Daniel; Kempa, Bernd; Pierdzioch, Christian
    Abstract: We argue that the use of publicly available and easily accessible information on economic and financial crises to detect structural breaks in the link between stock returns and macroeconomic predictor variables improves the performance of simple trading rules in real time. In particular, our results suggest that accounting for structural breaks and regime shifts in forecasting regressions caused by economic and financial crises has the potential to increase the out-of-sample predictability of stock returns, the performance of simple trading rules, and the market-timing ability of an investor trading in the U.S. stock market.
    Keywords: Forecasting stock returns; financial and economic crises; trading rules
    JEL: C53 G11 E44
    Date: 2006–10
  4. By: Hartmann, Daniel; Pierdzioch, Christian
    Abstract: We examined the link between international equity flows and U.S. stock returns. Based on the results of tests of in-sample and out-of-sample predictability of stock returns, we found evidence of a strong positive (negative) link between international equity flows and contemporaneous (one-month-ahead) stock returns. Our results also indicate that an investor, in real time, could have used information on the link between international equity flows and one-month-ahead stock returns to improve the performance of simple trading rules.
    Keywords: International equity flows; predictability of stock returns; performance of trading rules; the United States
    JEL: G11 E44 F32
    Date: 2006–02
  5. By: Gluschenko, Konstantin
    Abstract: This paper deals with testing a time series with a structural break in its mean for a unit root when the break date is known. A nonlinear (with respect to coefficients) test equation is used, providing asymptotically efficient estimates. Finite-sample and quasi-asymptotic empirical distributions of the unit root test statistics are estimated, comparing them with those associated with the Perron-type equations. Asymptotic distributions of the nonlinear test statistics are found to be the Dickey-Fuller distributions. The nonlinear test proves to have more power than the test based on the linear model.
    Keywords: structural break; nonlinear regression; nonstandard distribution
    JEL: C22 C16 C15 C12
    Date: 2004–08
  6. By: Kizys, Renatas; Pierdzioch, Christian
    Abstract: We study whether asymmetric macroeconomic shocks help to explain changes in the international comovement of monthly stock returns in major industrialized countries over the period 1970-2004. Based on a time-varying parameter model, we trace out how the pattern of international comovement of stock returns changed over time. In order to identify asymmetric macroeconomic shocks, we estimate vector autoregressive models. The results of estimating time-series regression models and panel-data models indicate that changes in the international comovement of stock returns are not systematically linked to macroeconomic shocks.
    Keywords: International comovement of stock returns; Asymmetric macroeconomic shocks; Time-varying parameter model; Time-series regression model; Panel-data model
    JEL: G15 E31 F37
    Date: 2006–07

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