nep-ets New Economics Papers
on Econometric Time Series
Issue of 2008‒05‒10
three papers chosen by
Yong Yin
SUNY at Buffalo

  1. Limit Theorems for Functionals of Sums that Converge to Fractional Brownian and Stable Motions By P. Jeganathan
  2. Nonlinearities in Exchange rates: Double EGARCH Threshold Models for Forecasting Volatility By Sitzia, Bruno; Iovino, Doriana
  3. Bayesian Model Averaging and Identification of Structural Breaks in Time Series By Fraser, Iain; Balcombe, Kelvin; Sharma, Abhijit

  1. By: P. Jeganathan (Indian Statistical Institute)
    Abstract: Too technical to post, see paper.
    Keywords: Fractional ARIMA, Sums of linear process, Nonlinear functionals, Limit theorems, Local time, Fractional Brownian and Stable motions
    JEL: C22 C23
    Date: 2008–04
  2. By: Sitzia, Bruno; Iovino, Doriana
    Abstract: This paper illustrates how to specify and test a Double Threshold EGARCH Model for some important exchange rates. The analysis is monthly and refers to the period 1990.01-2007.06. The procedure involves testing for Threshold effects the residuals of a linear autoregressive model of the exchange rate that is taken as the starting point. If this preliminary testing is favourable to the hypothesis off nonlinearity one then specifies and estimates a threshold model using Tong (1983,1990) algorithm, Tong algorithm allows to specify separately two AR regimes and helps locating both the delay and the parameters of the regimes using a search procedure based on the AIC. Residual for the SETAR model are then further tested for conditional heteroskedasticity. If it is present then a Double symmetric EGARCH is fitted to the data by maximum likelihood. The result is compared with an AR GARCH model both in sample and out of sample to asses whether there is any forecasting superiority of the more complex model. Reported results favour this outcome. In the text of the paper we report explicitly the results for the Japanese yen and the British pound exchange rates vis a vis the US dollar, but the same procedure has been applied to many other exchange rate series with results favourable to the double variance model in more than 50% of the cases. We report the complete results in the appendix. We conclude that the proposed model is both feasible and of wide applicability to the analysis of volatility of exchange rates. We add two provisos: data are monthly and the period of estimation reflects only the most recent experience.
    Keywords: non linearity; forecasting volatility; exchange rates
    JEL: C22
    Date: 2008–01–18
  3. By: Fraser, Iain; Balcombe, Kelvin; Sharma, Abhijit
    Abstract: Bayesian model averaging is used for testing for multiple break points in uni- variate series using conjugate normal-gamma priors. This approach can test for the number of structural breaks and produce posterior probabilities for a break at each point in time. Results are averaged over speciÖcations including: station- ary; stationary around trend; and, unit root models, each containing di§ erent types and numbers of breaks and di§ erent lag lengths. The procedures are used to test for structural breaks on 14 annual macroeconomic series and 11 natural resource price series. The results indicate that there are structural breaks in al l of the natural resource series and most of the macroeconomic series. Many of the series had multiple breaks. Our Öndings regarding the existence of unit roots, having al lowed for structural breaks in the data, are largely consistent with previous work.
    Keywords: Bayesian Model Averaging; Structural Breaks; Unit Root; Macro- economic Data; Natural Resource data
    JEL: C01 C11
    Date: 2007–10

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