We study the empirical behaviour of semi-parametric log-periodogram estimation forlong memory models when the true process exhibits a change in persistence. Simulationresults confirm theoretical arguments which suggest that evidence for long memory islikely to be found...

Determining good parameter estimates in ESTAR models is known to be difficult. We showthat the phenomena of getting strongly biased estimators is a consequence of the so-calledidentication problem, the problem of properly distinguishing the transition function in relationto extreme parameter...

While it is widely agreed that Purchasing Power Parity (PPP) holds as a long-runconcept the specific dynamic driving the process is largely build upon a priori economicbelief rather than a thorough statistical modeling procedure. The two prevailing timeseries models, i.e. the exponential smooth...

We show that tests for a break in the persistence of a time series in the classicalI(0) - I(1) framework have serious size distortions when the actual data generatingprocess exhibits long-range dependencies. We prove that the limiting distributionof a CUSUM of squares based test depends on the...

We show that the power of the KPSS-test against inte-gration, as measured by divergence rates of the test statistic underthe alternative, remains the same when residuals from an OLS-regression rather than true observations are used.[...]

This paper analyzes and quantifies the idea of model risk in the environment of internal modelbuilding. We define various types of model risk including estimation risk, model risk in distributionand model risk in functional form. By the quantification of these concepts we analyzethe impact of...

We study survival, price impact and portfolio impact in heterogeneouseconomies. We show that, under the equilibrium risk-neutral measure,long-run price impact is in fact equivalent to survival, whereas longrunportfolio impact is equivalent to survival under an agent-specic,wealth-forward...

We provide a representation for the nonmyopic optimal portfolio of an agentconsuming only at the terminal horizon when the single state variable follows ageneral diusion process and the market consists of one risky asset and a risk-freeasset. The key term of our representation is a new object...

We study the existence of dynamic equilibria with endogenously complete markets incontinuous-time, heterogenous agents economies driven by diusion processes. Ourmain results show that under appropriate conditions on the transition density ofthe state variables, market completeness can be deduced...

We extend the Lucas asset pricing tree economy to a heterogeneous population.Perturbative methods are applied to explicitly calculate the secondorder response of asset returns to heterogeneity. We discover thatthere exists a unique "best homogeneous approximation" to a weakly...