This paper exploits the fact that implied volatilities calculated from identical call and put options have often been empirically found to differ, although they should be equal in theory. We propose a new bivariate mixture multiplicative error model and show that it is a good fit to Nikkei 225...

Using GARCH-in-Mean models, we study the robustness of the risk-return relationship in monthly U.S. stock market returns (1928:1-2004:12) with respect to the specification of the conditional mean equation. The issue is important because in this commonly used framework, unnecessarily including an...

In this paper, we propose a new GARCH-in-Mean (GARCH-M) model allowing for conditional skewness. The model is based on the so-called z distribution capable of modeling skewness and kurtosis of the size typically encountered in stock return series. The need to allow for skewness can also be...

type="main" xml:id="obes12041-abs-0001" <title type="main">Abstract</title> <p>We propose a new methodology for ranking in probability the commonly proposed drivers of inflation in the new Keynesian model. The approach is based on Bayesian model selection among restricted vector autoregressive (VAR) models, each of which...</p>

We develop tests for predictability in a first-order ARMA model often suggested for stock returns. Instead of the conventional ARMA model, we consider its non-Gaussian and noninvertible counterpart that has identical autocorrelation properties but allows for conditional heteroskedasticity...