Recent studies have shown that firms credit rating transition process is not stationary and may have structural breaks. To study the predictability of structural breaks, we develop a predictive model for latent structural breaks in firms rating transition dynamics, using historical records of (highdimensional) economic and market fundamentals. As a large number of economic and market variables ...

This paper proposes an alternative to the asymptotic principal components procedure of Connor and Korajczyk (J. Financial Econom. 15 (1986) 373) that is robust to time series heteroskedasticity in the factor model residuals. The new method is simple to use and requires no assumptions stronger than those made by Connor and Korajczyk. It is demonstrated through simulations and analysis of actual ...

We investigate the asymptotic behavior of the OLS estimator for regressions with two slowly varying regressors. It is shown that the possibilities include a definite case, when the third-order regular variation is sufficient to determine the asymptotic distribution, and an indefinite case, when higher-order regular variation is required to find the distribution. In the definite case the asympto...

A new test for hysteresis based on a nonlinear unobserved components model is proposed. Observed unemployment rates are decomposed into a natural rate component and a cyclical component. Threshold type nonlinearities are introduced by allowing past cyclical unemployment to have a different impact on the natural rate depending on the regime of the economy. The impact of lagged cyclical shocks on...

Assumptions about the dynamic and distributional behavior of risk factors are crucial for the construction of optimal portfolios and for risk assessment. Although asset returns are generally characterized by conditionally varying volatilities and fat tails, the normal distribution with constant variance continues to be the standard framework in portfolio management. Here we propose a practical ...

This paper develops a new framework and statistical tools to analyze stock returns using high frequency data. We consider a continuous-time multi-factor model via a continuous-time multivariate regression incorporating realistic empirical features, such as persistent stochastic volatilities with leverage effects. We find that conventional regression approach often leads to misleading and incons...

We examine bias corrections which have been proposed for the Fixed Effects Panel Probit model with exogenous regressors, using several different data generating processes to evaluate the performance of the estimators in different situations. We find a best estimator across all cases for coefficient estimates, but when the marginal effects are the quantity of interest no analytical correction is...

In this study, New Zealand and Finland are examined by Autoregressive distributed lag (ARDL) model for the relationship between coal consumption economic growth. For growth relationship, Kuznets curve is investigated period 1980 2015 2013. Results of study show that confirmed Finland. Hao et al. (2016) as in This contributes to current literature verifying Coal also not these countries before. ...

The Journal of Economic Literature codes classification system (JEL) published by the American Association (AEA) is de facto standard for research literature in economics. JEL used to classify articles, dissertations, books, book reviews, and working papers EconLit, a database maintained AEA. Over time, it has evolved extended with over 850 subclasses. This paper reviews history development sys...

In the single-IV model, researchers commonly rely on t-ratio-based inference, even though literature has quantified its potentially severe large-sample distortions. Building Stock and Yogo (2005), we introduce tF critical value function, leading to a standard error adjustment that is smooth function of first-stage F-statistic. For one-quarter specifications in 61 AER papers, corrected errors ar...