Asset returns are frequently assumed to be determined by one or more common factors. We consider a bivariate factor model, where the unobservable common factor and idiosyncratic errors are stationary and serially uncorrelated, but have strong dependence in higher moments. Stochastic volatility...

Nonlinear functions of multivariate financial time series can exhibit long memory and fractional cointegration. However, tools for analysing these phenomena have principally been justified under assumptions that are invalid in this setting. Determination of asymptotic theory under more plausible...