One puzzling behavior of asset returns for various frequencies is the often observed positive autocorrelation at lag 1. To some extent this can be explained by standard asset pricing models when assuming time varying risk premia. However, one often finds better results when directly fitting an...

In this paper we introduce a bootstrap procedure to test parameter restrictions in vector autoregressive models which is robust in cases of conditionally heteroskedastic error terms. The adopted wild bootstrap method does not require any parametric specification of the volatility process and...

The properties of a range of maximum eigenvalue and trace tests for the cointegrating rank of a vector autoregressive process are compared. The tests are alilikelihood ratio type tests and operate under different assumptions regarding the deterministic part of the data generation process. The...

Daily returns of financial assets are frequently found to exhibit positive autocorrelation at lag 1. When specifying a linear AR(l) conditional mean, one may ask how this predictability affects option prices. We investigate the dependence of option prices on autoregressive dynamics under...

In this paper I analyse the effects of ignoring level shifts in the data generating process (DGP) on systems cointegration tests that do not accommodate level shifts. I consider two groups of Likelihood Ratio tests based on procedures suggested by Johansen (1988, 1995) and Saikkonen & Lütkepohl...

In this paper we test the purchasing power parity for the post Bretton Woods period for 18 main industrial countries. As base currencies we use alternatively the Deutsche mark, the Japanese yen, and the US dollar. We employ error correction models for single countries and on the level of pooled...