We exploit the distributional information contained in high-frequency intraday data in constructing a simple conditional moment estimator for stochastic volatility di usions. The estimator is based on the analytical solutions of the rst two conditional moments for the integrated volatility, which is e ectively approximated by the quadratic variation of the process. We successfully implement the...

Disputes about econometric methodology partly reflect a lack of evidence on alternative approaches. We reconsider econometric model selection from a computer-automation perspective, focusing on general-to-specific reductions, embodied in PcGets. Starting from a general congruent model, standard testing procedures eliminate statistically-insignificant variables, with diagnostic tests checking th...

Using the spectral regression and Gaussian semiparametric methods of estimating the long-memory parameter, we test for fractional dynamic behavior in a number of important Japanese financial time series: spot exchange rates, forward exchange rates, stock prices, currency forward premia, Euroyen deposit rates, and the Euroyen term premium. Stochastic long memory is established as a feature of th...

We study the returns to investing in VIX futures and VIX Exchange Traded Notes (ETNs). We document a substantial negative return premium for both ETNs and the futures. For example, the a constant maturity portfolio of one-month VIX futures loses about 30% per year over our sample period (2006-2013). We propose an equilibrium model to explain these negative returns. In this model, increases in v...

A trivariate vector autoregression time series process, based on a present-value land price model, is used to decompose Iowa farmland prices into fundamental and non-fundamental components. A recent study, by Falk and Lee (1998), found that non-fundamental shocks are an important source of volatility in farmland prices and it was interpreted that these price movements were due to fads not specu...

This paper investigates whether the degree of predictability can be explained by existing asset pricing models, and provides two theoretical upper bounds on the R-square of the regression of stock returns on predictors for given classes of models of interest. Empirically, we find that the predictive R-square is significantly larger than the upper bounds permitted by well known asset pricing mod...

Cointegration among interest rates for instruments with different maturities has been widely tested with mixed results. This paper proposes an extension to the Engle-Granger testing strategy by permitting asymmetry in the adjustment toward equilibrium in two different ways. We demonstrate that our test has good power and size properties over the Engle-Granger test when there are asymmetric depa...

This paper analyses revisions of Swiss current account data, taking into account the actual data revision process and the implied types of revisions. In addition we investigate whether the first release of current account data can be improved upon by the use of survey results as gathered by the KOF Swiss Economic Institute, ETH Zurich. An answer in the affirmative indicates that it is possible ...

We conduct both an approximate Bayesian Model Averaging (BMA) and an exact Bayesian analysis to incorporate break date uncertainty of the mean growth rate into the trend-cycle decomposition of U.S. real GDP. Our results suggest a structural break in mean growth rate of U.S. real GDP in 1970s. Comparing to the models assuming fixed break date, we find higher uncertainty in the posterior density ...

We consider the best quadratic unbiased estimators of the integrated variance in the presence of independent market microstructure noise. We establish the asymptotic normality of a feasible best quadratic unbiased estimator under the assumption of constant volatility and show that it is asymptotically e cient when the market microstructure noise is normal. Since the class of quadratic estimator...