We propose a procedure for estimating the critical values of the Klecan, McFadden, and McFadden (1990) test for first and second order stochastic dominance in the general k-prospect case. Our method is based on subsampling bootstrap. We show that the resulting test is consistent. We allow for...

The present paper introduces new sign tests for testing for conditionally symmetric martingale-difference assumptions as well as for testing that conditional distributions of two (arbitrary) martingale-difference sequences are the same. Our analysis is based on the results that demonstrate that...

This paper proposes a Gaussian estimator for nonlinear continuous time models of the short term interest rate. The approach is based on a stopping time argument that produces a normalizing transformation facilitating the use of a Gaussian likelihood. A Monte Carlo study shows that the finite...

Efficient markets models assert that the price of each asset is equal to the optimal forecast of its ex-post or fundamental value. These models do not imply, however, that the covariance between two asset prices is given by the covariance between the ex-post values they respectively forecast:...

We review the theory of leverage developed in collateral equilibrium models with incomplete markets. We explain how leverage tends to boost asset prices, and create bubbles. We show how leverage can be endogenously determined in equilibrium, and how it depends on volatility. We describe the...

This note examines the effect of changes in risk aversion on the optimal portfolio choice in a complete market. It is shown that an agent who is less risk averse in the Pratt (1964) sense than another will choose a portfolio whose payoff is distributed as the other's payoff plus a nonnegative...

We develop tests for common values at first-price sealed-bid auctions. Our tests are nonparametric, require observations only of the bids submitted at each auction, and are based on the fact that the "winner's curse" arises only in common values auctions. The tests build on recently developed...

We present a simple way to estimate the effects of changes in a vector of observable variables X on a limited dependent variable Y when Y is a general nonseparable function of X and unobservables. We treat models in which Y is censored from above or below or potentially from both. The basic idea...

Employing power kernels suggested in earlier work by the authors (2003), this paper shows how to re.ne methods of robust inference on the mean in a time series that rely on families of untruncated kernel estimates of the long-run parameters. The new methods improve the size properties of...

We propose non-nested hypotheses tests for conditional moment restriction models based on the method of generalized empirical likelihood (GEL). By utilizing the implied GEL probabilities from a sequence of unconditional moment restrictions that contains equivalent information of the conditional...