Department of Economics
UC, San Diego
9500 Gilman Drive
La Jolla, CA 92093
Institutional Affiliation: University of California at San Diego
Information about this author at RePEc
NBER Working Papers and Publications
|December 1995||Heterogeneous Expectations and Tests of Efficiency in the Yen/Dollar Forward Foreign Exchange Rate Market|
with Takatoshi Ito: w5376
This paper examines the efficiency of the forward yen/dollar market using micro survey data. We first argue that the conventional tests of efficiency (unbiasedness) of the forward rate or of the survey forecasts do not correspond directly to the zero-profit condition. Instead, we use the survey data to calculate directly potential profits of individual forecasters based on a natural trading rule. We find that although the survey data are not the best predictor of future spot rate in terms of typical mean square forecast error criteria, the survey data can be used to obtain on average positive profits. However, these profits are small and highly variable. We also examine profits generated by a trading rule using regression forecasts, where forward premium is an explanatory variable. T...
Published: Journal of Monetary Economics, Vol. 43, no. 2 (April 1999): 435-456.
|December 1992||Efficient Tests for an Autoregressive Unit Root|
with Thomas J. Rothenberg, James H. Stock: t0130
This paper derives the asymptotic power envelope for tests of a unit autoregressive root for various trend specifications and stationary Gaussian autoregressive disturbances. A family of tests is proposed, members of which are asymptotically similar under a general 1(1) null (allowing nonnormality and general dependence) and which achieve the Gaussian power envelope. One of these tests, which is asymptotically point optimal at a power of 50%, is found (numerically) to be approximately uniformly most powerful (UMP) in the case of a constant deterministic term, and approximately uniformly most powerful invariant (UMPI) in the case of a linear trend, although strictly no UMP or UMPI test exists. We also examine a modification, suggested by the expression for the power envelope, of the Dickey-...
Published: Elliott, Graham, Thomas J. Rothenberg and James H. Stock. "Efficient Tests For An Autoregressive Unit Root," Econometrica, 1996, v64(4,Jul), 813-836.
|June 1992||Inference in Time Series Regression When the Order of Integration of a Regressor is Unknown|
with James H. Stock: t0122
It is well known that the distribution of statistics testing restrictions on the coefficients in time series regressions can depend on the order of integration of the regressors. In practice the order of integration is rarely blown. This paper examines two conventional approaches to this problem, finds them unsatisfactory, and proposes a new procedure. The two conventional approaches- simply to ignore unit root problems or to use unit root pretests to determine the critical values for second-stage inference - both often induce substantial size distortions. In the case of unit root pretests, this arises because type I and II pretest errors produce incorrect second-stage critical values and because, in many empirically plausible situations, the first stage test (the unit root test) and the s...
Published: Economic Theory, vol 10, (1994) pp 672-700.