When volatility feedback is taken into account, there is strong evidence of a positive tradeoff between stock market volatility and expected returns on a market portfolio. In this paper, we ask whether this intertemporal tradeoff between risk and return is responsible for the reported evidence of mean reversion in stock prices. There are two relevant findings. First, price movements not related...

This paper focuses on the performance of various GARCH models in terms of their ability of delivering volatility forecasts for stock return data. Volatility forecasts obtained from a variety of mean and variance specifications in GARCH models are compared to a proxy of actual volatility calculated using daily data. In-sample tests suggest that a regression of volatility estimates on actual vola...

Well known encompassing tests are usually difficult to implement because it is difficult to compute the pseudo-true value of the quasi-maximum likelihood estimator. In this paper, we propose a more operational encompassing test that does not involve such pseudo-true value. Instead, the proposed test relies on the “pseudo-true score” which is relatively easier to evaluate. We show that this test...

Consider a non-standard parametric estimation problem, such as the estimation of the AR(1) coefficient close to the unit root. We develop a numerical algorithm that determines an estimator that is nearly (mean or median) unbiased, and among all such estimators, comes close to minimizing a weighted average risk criterion. We demonstrate the usefulness of our generic approach by also applying it ...

s tructural change is defined as a change in the relative weight of the important constituents of the macro-economic indicator such as production, taxes, imports and exports, workforce etc. since the structure change is one of the main reasons for the growth and economic development of countries, the investigation of the trend of changes in economic important constituents is important. tax as a...

abstract: this paper discusses two topics. at first, it uses continuous wavelet (morlet) transform, coherency, and phase angle analysis to study the effect of mean volatility in opec crude oil prices, wti crude oil prices, brent crude oil prices and iran’s crude oil prices on the iran’s reer. to this end, the monthly data of the variables for years 2003 to 2012 is used. coherency analysis revea...

We investigate the effects of outliers on the KPSS tests. We find that for nonstationary series outliers induce spurious stationarity by lowering the power of these tests. The empirical size of these tests is also found to be sensitive to the location of the outlier. JEL classification: C15, C22

This paper estimates the speed of the adjustment coefficient in structural error correction models (ECM) and employs a system method for real exchange rates with Hansen and Sargent’s (1980, 1982) IV methods. Empirical results show that the half-lives of purchasing power parity deviations are less than one year in most cases. JEL classification: C22, F31, F41

T his paper is to examine the mean reverting properties of inflation rates for Iran’s 25 provinces over the period from 1990:4 to 2017:7. To the end, we use various conventional univariate linear and non-linear unit root tests, as well as quantile unit root test by Koenker and Xiao (2004). Results of conventional unit root tests indicate that the null hypothesis of the unit root test...

This study shows that annual output data of the G7 countries in the twentieth century are better characterized as transitory deviations from a (shifting) growth trend than as integrated processes. Furthermore, I find no two countries share common business cycles. JEL classification: C22, E32, 057