Journal ArticleDOI
The Great Crash, the Oil Price Shock, and the Unit Root Hypothesis
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In this paper, the authors consider the null hypothesis that a time series has a unit root with possibly nonzero drift against the alternative that the process is "trend-stationary" and show how standard tests of the unit root hypothesis against trend stationary alternatives cannot reject the unit-root hypothesis if the true data generating mechanism is that of stationary fluctuations around a trend function which contains a one-time break.Abstract:
We consider the null hypothesis that a time series has a unit root with possibly nonzero drift against the alternative that the process is «trend-stationary». The interest is that we allow under both the null and alternative hypotheses for the presence for a one-time change in the level or in the slope of the trend function. We show how standard tests of the unit root hypothesis against trend stationary alternatives cannot reject the unit root hypothesis if the true data generating mechanism is that of stationary fluctuations around a trend function which contains a one-time breakread more
Citations
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Exogeneity, causality, and co-breaking in economic policy analysis of a small econometric model of money in the UK
David F. Hendry,Grayham E. Mizon +1 more
TL;DR: The authors discuss the role of exogeneity, causality, cointegration, co-breaking, and invariance in linear cointegrated VARs and illustrate their importance in a bivariate model of money and interest rates in the UK over the last century.
Journal ArticleDOI
Stochastic Divergence or Convergence of Per Capita Carbon Dioxide Emissions: Re-examining the Evidence
TL;DR: The authors revisited the time-series literature on the convergence of per capita carbon dioxide (CO2) emissions and examined the robustness of previous results, concluding that per capita CO2 emissions have not converged among OECD countries during the period under consideration.
Journal ArticleDOI
Testing neoclassical convergence in regional incomes and earnings
TL;DR: This paper found evidence for per capita income convergence for U.S. regions during the 1929-1990 period after allowing for a trend break in 1946 and found that the regional distribution of transfer payments tends to smooth the effects of deviation on relative regional per capita earnings.
Journal ArticleDOI
Can Managers Forecast Aggregate Market Returns
Abstract: Previous studies have found that the proportion of equity in total new debt and equity issues is negatively correlated with future equity market returns. Researchers have interpreted this finding as evidence that corporate managers are able to predict the systematic component of their stock returns and to issue equity when the market is overvalued. In this article we show that the predictive power of the share of equity in total new issues stems from pseudo-market timing and not from any abnormal ability of managers to time the equity markets. A CONTROVERSIAL AND IMPORTANT ISSUE among financial economists is whether corporate managers accurately time the market when they issue new securities. At the firm level, researchers typically address this question by examining the long-run performance of stocks following equity issues. Although there is empirical evidence supporting the idea that managers are able to sell overpriced securities during initial public offerings (IPOs) and seasoned equity offerings (SEOs) (see Ritter (1991), Loughran and Ritter (1995), and Spiess and AffleckGraves (1995)), several recent studies challenge these results.1 Adding to this controversy, a recent article by Baker and Wurgler (2000) finds evidence that managers can time not only the idiosyncratic component of their returns but also the systematic component. Specifically, these authors find that, in-sample, the share of equity in total new issues (equity share) is strongly negatively correlated with future aggregate equity market returns. Taken at face value, these findings have important implications because they suggest that markets are unable to allocate capital efficiently even in the aggregate.2
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Expected Returns and Expected Growth in Rents of Commercial Real Estate
TL;DR: In this article, the authors investigate whether the cap-price ratio in commercial real estate incorporates information about future expected real estate returns and future growth in rents and find that the cap rate captures fluctuations in expected returns for apartments, retail, as well as industrial properties.
References
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Journal ArticleDOI
Co-integration and Error Correction: Representation, Estimation and Testing
TL;DR: The relationship between co-integration and error correction models, first suggested in Granger (1981), is here extended and used to develop estimation procedures, tests, and empirical examples.
Journal ArticleDOI
Distribution of the Estimators for Autoregressive Time Series with a Unit Root
David A. Dickey,Wayne A. Fuller +1 more
TL;DR: In this article, the limit distributions of the estimator of p and of the regression t test are derived under the assumption that p = ± 1, where p is a fixed constant and t is a sequence of independent normal random variables.
Journal ArticleDOI
Testing for a Unit Root in Time Series Regression
TL;DR: In this article, the authors proposed new tests for detecting the presence of a unit root in quite general time series models, which accommodate models with a fitted drift and a time trend so that they may be used to discriminate between unit root nonstationarity and stationarity about a deterministic trend.
Journal ArticleDOI
Likelihood ratio statistics for autoregressive time series with a unit root
David A. Dickey,Wayne A. Fuller +1 more
Book
Convergence of Probability Measures
TL;DR: Weak Convergence in Metric Spaces as discussed by the authors is one of the most common modes of convergence in metric spaces, and it can be seen as a form of weak convergence in metric space.
Related Papers (5)
Further Evidence on the Great Crash, the Oil-Price Shock, and the Unit-Root Hypothesis
Eric Zivot,Donald W.K. Andrews +1 more
Distribution of the Estimators for Autoregressive Time Series with a Unit Root
David A. Dickey,Wayne A. Fuller +1 more