Unit-Root Tests and Excess Returns Staff Working Paper 1996-10 Marie-Josée Godbout, Simon van Norden Several recent papers have presented evidence from foreign exchange and other markets suggesting that the log of excess returns can be characterized as first-order integrated processes (I(1)). This contrasts sharply with the "conventional" wisdom that log prices are integrated of order one I(1) and that log returns should therefore be integrated of order zero I(0), and even more sharply with the view that past returns have no ability to predict future returns (weak market efficiency). Content Type(s): Staff research, Staff working papers Topic(s): Econometric and statistical methods JEL Code(s): C, C1, C12, F, F3, F31
Regime-Switching Models: A Guide to the Bank of Canada Gauss Procedures Staff Working Paper 1996-3 Simon van Norden, Robert Vigfusson This paper is a user's guide to a set of Gauss procedures developed at the Bank of Canada for estimating regime-switching models. Content Type(s): Staff research, Staff working papers Topic(s): Econometric and statistical methods JEL Code(s): C, C6, C63
Selection of the Truncation Lag in Structural VARs (or VECMs) with Long-Run Restrictions Staff Working Paper 1995-9 Alain DeSerres, Alain Guay authors examine the issue of lag-length selection in the context of a structural vector autoregression (VAR) and a vector error-correction model with long-run restrictions. First, they show that imposing long-run restrictions implies, in general, a moving-average (MA) component in the stationary multivariate representation. Then they examine the sensitivity of estimates of the permanent and transitory […] Content Type(s): Staff research, Staff working papers Topic(s): Econometric and statistical methods
Analytical Derivatives for Markov Switching Models Staff Working Paper 1995-7 Jeff Gable, Simon van Norden, Robert Vigfusson This paper derives analytical gradients for a broad class of regime-switching models with Markovian state-transition probabilities. Such models are usually estimated by maximum likelihood methods, which require the derivatives of the likelihood function with respect to the parameter vector. These gradients are usually calculated by means of numerical techniques. The paper shows that analytical gradients […] Content Type(s): Staff research, Staff working papers Topic(s): Econometric and statistical methods