This paper examines the stability of coefficient estimates from weak-form and semi-strong form te... more This paper examines the stability of coefficient estimates from weak-form and semi-strong form tests of efficiency in the 30-day forward exchange rate using Canadian/U.S. weekly and monthly data. The structural relationships are unstable and conclusions based on the full sample estimation can, at times, be highly misleading. We argue against the usefulness of semi-strong-form tests in the absence of behavioural
ABSTRACT As one type of market circuit breaker, price limits have been imposed on many stock and ... more ABSTRACT As one type of market circuit breaker, price limits have been imposed on many stock and futures markets. This paper proposes a censored–GARCH model for the return process of assets with price limits and develops a Bayesian approach to this model. The worthiness of the model and the estimation method is demonstrated with an application to Treasury bill futures over a period of high volatility and frequent limit moves.
ABSTRACT This paper computes the occupational shifts required to accommodate structural change in... more ABSTRACT This paper computes the occupational shifts required to accommodate structural change initiated by microelectronic-based technical change (MTC) in Canada. Occupational shifts are decomposed into supply side versus those induced by final demand changes. The results are presented for an historical period, for the reference and counterfactual (no MTC) path to 1990, and for two alternative 1990 post technical change solutions.
ABSTRACT J. D. Hamilton's nonlinear Markovian filter is extended to allow state transitio... more ABSTRACT J. D. Hamilton's nonlinear Markovian filter is extended to allow state transitions to be duration dependent. Restrictions are imposed on the state transition matrix associated with a tau-order Markov system such that the corresponding first-order conditional transition probabilities are functions of both the inferred current state and also the number of periods the process has been in that state. High-order structure is parsimoniously summarized by the inferred duration variable. Applied to U.S. postwar real GNP growth rates, the authors obtain evidence in support of nonlinearity, asymmetry between recessions and expansions, and duration dependence for recessions but not for expansions.
Simple general equilibrium growth model are used to analyse non-steady-state dynamic adjustments.... more Simple general equilibrium growth model are used to analyse non-steady-state dynamic adjustments. Alternative methods of closing the efficiency surface structure result in prescriptive versus descriptive versions. A sequence of models is analysed to illustrate.
ABSTRACT Multifactor asset pricing models play an important role in evaluation of anomalies and m... more ABSTRACT Multifactor asset pricing models play an important role in evaluation of anomalies and managed portfolios. In empirical studies, however, the researchers' prior often include a rich set of competing models which all seem plausible, but none is conclusively dominant. In this paper we propose a unified approach to model selection and inference for application and evaluation of factor pricing models. We run horse races among a set of high profile models to select winners according to predictive ability and then utilize White's (2000) reality check methodology to test the top performers. We provide empirical results on testing multifactor explanations of industry momentum, and present a test of the three moment CAPM.
This paper examines the stability of coefficient estimates from weak-form and semi-strong form te... more This paper examines the stability of coefficient estimates from weak-form and semi-strong form tests of efficiency in the 30-day forward exchange rate using Canadian/U.S. weekly and monthly data. The structural relationships are unstable and conclusions based on the full sample estimation can, at times, be highly misleading. We argue against the usefulness of semi-strong-form tests in the absence of behavioural
ABSTRACT As one type of market circuit breaker, price limits have been imposed on many stock and ... more ABSTRACT As one type of market circuit breaker, price limits have been imposed on many stock and futures markets. This paper proposes a censored–GARCH model for the return process of assets with price limits and develops a Bayesian approach to this model. The worthiness of the model and the estimation method is demonstrated with an application to Treasury bill futures over a period of high volatility and frequent limit moves.
ABSTRACT This paper computes the occupational shifts required to accommodate structural change in... more ABSTRACT This paper computes the occupational shifts required to accommodate structural change initiated by microelectronic-based technical change (MTC) in Canada. Occupational shifts are decomposed into supply side versus those induced by final demand changes. The results are presented for an historical period, for the reference and counterfactual (no MTC) path to 1990, and for two alternative 1990 post technical change solutions.
ABSTRACT J. D. Hamilton's nonlinear Markovian filter is extended to allow state transitio... more ABSTRACT J. D. Hamilton's nonlinear Markovian filter is extended to allow state transitions to be duration dependent. Restrictions are imposed on the state transition matrix associated with a tau-order Markov system such that the corresponding first-order conditional transition probabilities are functions of both the inferred current state and also the number of periods the process has been in that state. High-order structure is parsimoniously summarized by the inferred duration variable. Applied to U.S. postwar real GNP growth rates, the authors obtain evidence in support of nonlinearity, asymmetry between recessions and expansions, and duration dependence for recessions but not for expansions.
Simple general equilibrium growth model are used to analyse non-steady-state dynamic adjustments.... more Simple general equilibrium growth model are used to analyse non-steady-state dynamic adjustments. Alternative methods of closing the efficiency surface structure result in prescriptive versus descriptive versions. A sequence of models is analysed to illustrate.
ABSTRACT Multifactor asset pricing models play an important role in evaluation of anomalies and m... more ABSTRACT Multifactor asset pricing models play an important role in evaluation of anomalies and managed portfolios. In empirical studies, however, the researchers' prior often include a rich set of competing models which all seem plausible, but none is conclusively dominant. In this paper we propose a unified approach to model selection and inference for application and evaluation of factor pricing models. We run horse races among a set of high profile models to select winners according to predictive ability and then utilize White's (2000) reality check methodology to test the top performers. We provide empirical results on testing multifactor explanations of industry momentum, and present a test of the three moment CAPM.
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Papers by Thomas McCurdy