We propose a tree-structured heterogeneous autoregressive (tree-HAR) process as a simple and parsimonious model for the estimation and prediction of tick-by-tick realized correlations. The model can account for different time and other relevant predictors’ dependent regime shifts in the conditional mean dynamics of the realized correlation series. Testing the model on S&P 500 and 30-year treasu...

In this paper, we propose a minimum LM unit root test that endogenously determines a structural break in intercept and trend. Critical values are provided, and size and power properties are compared to the endogenous one-break unit root test of Zivot and Andrews (1992). Nunes, Newbold, and Kuan (1997) and Lee and Strazicich (2001) previously demonstrated that the Zivot and Andrews test exhibits...

We consider the problem of estimating and testing for multiple breaks in a single equation framework with regressors that are endogenous, i.e., correlated with the errors. First, we show based on standard assumptions about the regressors, instruments and errors that the second stage regression of the instrumental variable procedure involves regressors and errors that satisfy all the assumptions...

I propose two simple variable addition test statistics for three tests of the specification of high-frequency predictors in a model to forecast a series observed at a lower frequency. The first is similar to existing test statistics and I show that it is robust to biased forecasts, integrated and cointegrated predictors, and deterministic trends, while it is feasible and consistent even if esti...

This paper develops the methodology and asymptotic theory for the estimation of longrun variance of continuous time process. We analyze the asymptotic bias and variance of the longrun variance estimator in continuous time, and provide the optimal bandwidth balancing them o↵ and minimizing the asymptotic mean squared error. In the paper, we present not only how to consistently estimate the longr...

Advanced statistical techniques are used to analyze Hong Kong output dynamics. Hong Kong, Japan and the U.S. are found to share some common long-term and short-term cyclical variations. While the Hong Kong economy is susceptible to external shocks and Granger-caused by the other two economies, local factors account for a large proportion of output growth variability and are mainly responsible f...

In this paper, we provide a detailed characterization of the return volatility in US Treasury bond futures contracts using a sample of 5-min returns from 1994 to 1997. We find that public information in the form of regularly scheduled macroeconomic announcements is an important source of volatility at the intraday level. Among the various announcements, we identify the Humphrey–Hawkins testimon...

In the first half of the paper I study spurious regressions in panel data. Asymptotic properties of the least-squares dummy variable (LSDV) estimator and other conventional statistics are examined. The asymptotics of LSDV estimator are different from those of the spurious regression in the pure time-series. This has an important consequence for residual-based cointegration tests in panel data, ...

We tested the validity of the “Law of Increasing State Activities” or Wagner’s Law using time series for the U.S. state-local government (SLG) real expenditure over the period 1957-2006. This period was characterized by rising SLG total expenditure and several of its sub-categories both in absolute terms and relative to state personal income. Cointegration tests of Johansen (1991) and Pesaran, ...

This paper provides a review of the literature on unit roots and cointegration in panels where the time dimension (T ), and the cross section dimension (N) are relatively large. It distinguishes between the first generation tests developed on the assumption of the cross section independence, and the second generation tests that allow, in a variety of forms and degrees, the dependence that might...