A standard test for weak instruments compares the first-stage F-statistic to a table of critical values obtained by Stock and Yogo (2005) using simulations. We derive a closed-form solution for the expectation from which these critical values are derived, as well as present some second-order...

This paper proposes an approach to measure the extent of nonlinearity of the exposure of a financial asset to a given risk factor. The proposed measure exploits the decomposition of a conditional expectation into its linear and nonlinear components. We illustrate the method with the measurement...

For nearly every major stock market there exist equity and implied volatility indices. These play important roles within finance: be it as a benchmark, a measure of general uncertainty or a way of investing or hedging. It is well known in the academic literature that correlations and higher...

Recently, several copula-based approaches have been proposed for modeling stationary multivariate time series. All of them are based on vine copulas, and they differ in the choice of the regular vine structure. In this article, we consider a copula autoregressive (COPAR) approach to model the...

Estimation of GARCH models can be simplified by augmenting quasi-maximum likelihood (QML) estimation with variance targeting, which reduces the degree of parameterization and facilitates estimation. We compare the two approaches and investigate, via simulations, how non-normality features of the...