We propose two nonparametric specification tests for continuous-time models based on transition density, which unlike the marginal density used in the literature, can capture the full dynamics of a continuous-time process. To improve the finite sample performance of nonparametric methods, we...

Using the daily data of Chinese 7-day repo rates from January 1, 1997 to December 31, 2008, this paper tests a variety of popular spot rate models, including single-factor diffusion, GARCH, Markov regime-switching and jump-diffusion models. We document that Chinese spot rates are subject to both...

We provide a model-free test for asymmetric correlations in which stocks move more often with the market when the market goes down than when it goes up, and also provide such tests for asymmetric betas and covariances. When stocks are sorted by size, book-to-market, and momentum, we find strong...

We develop a nonparametric specification test for continuous-time models using the transition density. Using a data transform and correcting for the boundary bias of kernel estimators, our test is robust to serial dependence in data and provides excellent finite sample performance. Besides...

In this paper, we provide a model-free test for asymmetric correlations which suggest stocks tend to have greater correlations with the market when the market goes down than when it goes up. We also provide such tests for asymmetric betas and covariances. In addition, we evaluate the economic...

We develop a nonparametric regression-based goodness-of-fit test for multifactor continuous-time Markov models using the conditional characteristic function, which often has a convenient closed-form or can be approximated accurately for many popular continuous-time Markov models in economics and...