nep-ets New Economics Papers
on Econometric Time Series
Issue of 2011‒11‒01
five papers chosen by
Yong Yin
SUNY at Buffalo

  1. Testing for Panel Cointegration Using Common Correlated Effects By Anindya Banerjee; Josep Lluis Carrion-i-Silvestre
  2. Modelling Comovements of Economic Time Series: A Selective Survey By Marco Centoni; Gianluca Cubadda
  3. Memory effects in stock price dynamics: evidences of technical trading By Federico Garzarelli; Matthieu Cristelli; Andrea Zaccaria; Luciano Pietronero
  4. Simulation based estimation of threshold moving average models with contemporaneous shock asymmetry By Taştan, Hüseyin
  5. Optimal Jackknife for Discrete Time and Continuous Time Unit Root Models By Ye Chen; Jun Yu

  1. By: Anindya Banerjee; Josep Lluis Carrion-i-Silvestre
    Abstract: Spurious regression analysis in panel data when time series are cross-section dependent is analyzed in the paper. We show that consistent estimation of the long-run average parameter is possible once we control for cross-section dependence using cross-section averages in the spirit of the common correlated effects approach in Pesaran (2006), Holly, Pesaran and Yamagata (2010) and Kapetanios, Pesaran and Yamagata (2011). This result is used to design a panel cointegration test statistic. The performance of the proposal is investigated in comparison with factor-based methods to control for dependence when both strong and weak cross-section dependence may be present.
    Keywords: Panel cointegration, cross-section dependence, common factors, spatial econometrics
    JEL: C12 C22
    Date: 2011–10
  2. By: Marco Centoni (LUMSA University); Gianluca Cubadda (Faculty of Economics, University of Rome "Tor Vergata")
    Abstract: Modelling comovements amongst multiple economic variables takes up a relevant part of the literature in time series econometrics. Comovement can be defined as "move together", that is as movement that several series have in common. The pattern of the series could be of different nature, such as trend, cycles, seasonality, being the results of different driving forces. As a results, series that comove share some common features. Common trends, common cycles, common seasonality are terms that are often found in the literature, different in scope but all aimed at modeling common behavior of the series. However, modeling comovements is not only a statistical matter, since in many cases common features are predicted by economic theory, resulting from the optimizing behavior of economic agents.
    Date: 2011–10–26
  3. By: Federico Garzarelli; Matthieu Cristelli; Andrea Zaccaria; Luciano Pietronero
    Abstract: Technical trading represents a class of investment strategies for Financial Markets based on the analysis of trends and recurrent patterns of price time series. According standard economical theories these strategies should not be used because they cannot be profitable. On the contrary it is well-known that technical traders exist and operate on different time scales. In this paper we investigate if technical trading produces detectable signals in price time series and if some kind of memory effect is introduced in the price dynamics. In particular we focus on a specific figure called supports and resistances. We first develop a criterion to detect the potential values of supports and resistances. As a second step, we show that memory effects in the price dynamics are associated to these selected values. In fact we show that prices more likely re-bounce than cross these values. Such an effect is a quantitative evidence of the so-called self-fulfilling prophecy that is the self-reinforcement of agents' belief and sentiment about future stock prices' behavior.
    Date: 2011–10
  4. By: Taştan, Hüseyin
    Abstract: Persistence of shocks to macroeconomic time series may differ depending on the sign or on whether a threshold value is crossed. For example, positive shocks to gross domestic product may be more persistent than negative shocks. Threshold (or asymmetric) moving average (TMA) models, by explicitly taking into account threshold behavior, can help discriminate whether there exists persistence asymmetry. Recently, building on the works of Wecker (1981, JASA, 76(373)) and De Gooijer (1998, JTSA, 19(1)) among others, Guay and Scaillet (2003, JBES, 21(1)) proposed TMA model in which both contemporaneous and lagged asymmetric effects are present and provided indirect inference framework for estimation and testing. This paper builds on their work and examines the properties of efficient method of moments (EMM) estimation of TMA class of models using Monte Carlo simulation experiments. The model is also applied to analyze the persistence properties of shocks in Turkish business cycles.
    Keywords: Threshold moving average models; contemporaneous asymmetry; persistence of shocks; Efficient Method of Moments
    JEL: C15 C22 C01
    Date: 2011
  5. By: Ye Chen (School of Economics, Singapore Management Unversity); Jun Yu (School of Economics, Singapore Management Unversity)
    Abstract: Maximum likelihood estimation of the persistence parameter in the discrete time unit root model is known for suffering from a downward bias. The bias is more pronounced in the continuous time unit root model. Recently Chambers and Kyriacou (2010) introduced a new jackknife method to remove the fi…rst order bias in the estimator of the persistence parameter in a discrete time unit root model. This paper proposes an improved jackknife estimator of the persistence parameter that works for both the discrete time unit root model and the continuous time unit root model. The proposed jackknife estimator is optimal in the sense that it minimizes the variance. Simulations highlight the performance of the proposed method in both contexts. They show that our optimal jackknife reduces the variance of the jackknife method of Chambers and Kyriacou by at least 10% in both cases.
    Keywords: Bias reduction, Variance reduction, Vasicek model, Long-span Asymptotics, Autoregression
    JEL: C11 C15
    Date: 2011–10

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