Outputs (33)

Tests for Equal Forecast Accuracy Under Heteroskedasticity (2023)
Journal Article
Harvey, D. I., Leybourne, S. J., & Zu, Y. (in press). Tests for Equal Forecast Accuracy Under Heteroskedasticity. Journal of Applied Econometrics,

Heteroskedasticity is a common feature in empirical time series analysis, and in this paper we consider the e¤ects of heteroskedasticity on statistical tests for equal forecast accuracy. In such a context, we propose two new Diebold-Mariano-type test... Read More about Tests for Equal Forecast Accuracy Under Heteroskedasticity.

Improved tests for stock return predictability (2023)
Journal Article
Harvey, D. I., Leybourne, S. J., & Taylor, A. M. R. (2023). Improved tests for stock return predictability. Econometric Reviews, 42(9-10), 834-861. https://doi.org/10.1080/07474938.2023.2222634

Predictive regression methods are widely used to examine the predictability of (excess) stock returns by lagged financial variables characterized by unknown degrees of persistence and endogeneity. We develop a new hybrid test for predictability in th... Read More about Improved tests for stock return predictability.

Real-Time Monitoring of Bubbles and Crashes (2023)
Journal Article
Whitehouse, E. J., Harvey, D. I., & Leybourne, S. J. (2023). Real-Time Monitoring of Bubbles and Crashes. Oxford Bulletin of Economics and Statistics, 85(3), 482-513. https://doi.org/10.1111/obes.12540

Given the financial and economic damage that can be caused by the collapse of an asset price bubble, it is of critical importance to rapidly detect the onset of a crash once a bubble has been identified. We develop a real-time monitoring procedure fo... Read More about Real-Time Monitoring of Bubbles and Crashes.

Bonferroni Type Tests for Return Predictability and the Initial Condition (2023)
Journal Article
Astill, S., Harvey, D. I., Leybourne, S. J., & Taylor, A. M. (2023). Bonferroni Type Tests for Return Predictability and the Initial Condition. Journal of Business and Economic Statistics, Article 2201313. https://doi.org/10.1080/07350015.2023.2201313

We develop tests for predictability that are robust to both the magnitude of the initial condition and the degree of persistence of the predictor. While the popular Bonferroni Q test of Campbell and Yogo displays excellent power properties for strong... Read More about Bonferroni Type Tests for Return Predictability and the Initial Condition.

Estimation of the variance function in structural break autoregressive models with nonstationary and explosive segments (2022)
Journal Article
Harvey, D. I., Leybourne, S. J., & Zu, Y. (2023). Estimation of the variance function in structural break autoregressive models with nonstationary and explosive segments. Journal of Time Series Analysis, 44(2), 181-205. https://doi.org/10.1111/jtsa.12660

In this paper we consider estimating the innovation variance function when the conditional mean model is characterized by a structural break autoregressive model, which exhibits multiple unit root, explosive and stationary collapse segments, allowing... Read More about Estimation of the variance function in structural break autoregressive models with nonstationary and explosive segments.

Testing for Co-explosive Behaviour in Financial Time Series (2022)
Journal Article
Evripidou, A. C., Harvey, D. I., Leybourne, S. J., & Sollis, R. (2022). Testing for Co-explosive Behaviour in Financial Time Series. Oxford Bulletin of Economics and Statistics, 84(3), 624-650. https://doi.org/10.1111/obes.12487

This article proposes a test to determine if two price series that each contain an explosive autoregressive regime consistent with the presence of a bubble are related in the sense that a linear combination of them is integrated of order zero. We ref... Read More about Testing for Co-explosive Behaviour in Financial Time Series.

CUSUM-Based Monitoring for Explosive Episodes in Financial Data in the Presence of Time-Varying Volatility (2021)
Journal Article
Astill, S., Harvey, D. I., Leybourne, S. J., Taylor, A. R., & Zu, Y. (2023). CUSUM-Based Monitoring for Explosive Episodes in Financial Data in the Presence of Time-Varying Volatility. Journal of Financial Econometrics, 21(1), 187-227. https://doi.org/10.1093/jjfinec/nbab009

We generalise the Homm and Breitung (2012) CUSUM-based procedure for the real-time detection of explosive autoregressive episodes in financial price data to allow for time-varying volatility. Such behaviour can heavily inflate the false positive rate... Read More about CUSUM-Based Monitoring for Explosive Episodes in Financial Data in the Presence of Time-Varying Volatility.

Simple Tests for Stock Return Predictability with Good Size and Power Properties (2021)
Journal Article
Harvey, D. I., Leybourne, S. J., & Taylor, A. M. R. (2021). Simple Tests for Stock Return Predictability with Good Size and Power Properties. Journal of Econometrics, 224(1), 198-214. https://doi.org/10.1016/j.jeconom.2021.01.004

We develop easy-to-implement tests for return predictability which, relative to extant tests in the literature, display attractive finite sample size control and power across a wide range of persistence and endogeneity levels for the predictor. Our a... Read More about Simple Tests for Stock Return Predictability with Good Size and Power Properties.

Real?Time Detection of Regimes of Predictability in the U.S. Equity Premium (2020)
Journal Article
Harvey, D. I., Leybourne, S. J., Sollis, R., & Taylor, A. R. (2021). Real?Time Detection of Regimes of Predictability in the U.S. Equity Premium. Journal of Applied Econometrics, 36(1), 45-70. https://doi.org/10.1002/jae.2794

We propose new real-time monitoring procedures for the emergence of end-of-sample predictive regimes using sequential implementations of standard (heteroskedasticity-robust) regression t-statistics for predictability applied over relatively short tim... Read More about Real?Time Detection of Regimes of Predictability in the U.S. Equity Premium.

Date-stamping multiple bubble regimes (2020)
Journal Article
Harvey, D. I., Leybourne, S. J., & Whitehouse, E. J. (2020). Date-stamping multiple bubble regimes. Journal of Empirical Finance, 58, 226-246. https://doi.org/10.1016/j.jempfin.2020.06.004

Identifying the start and end dates of explosive bubble regimes has become a prominent issue in the econometric literature. Recent research has demonstrated the advantage of a model-based minimum sum of squared residuals estimator, combined with Baye... Read More about Date-stamping multiple bubble regimes.

Sign-based Unit Root Tests for Explosive Financial Bubbles in the Presence of Deterministically Time-Varying Volatility (2019)
Journal Article
Harvey, D. I., Leybourne, S. J., & Zu, Y. (2020). Sign-based Unit Root Tests for Explosive Financial Bubbles in the Presence of Deterministically Time-Varying Volatility. Econometric Theory, 36(1), 122-169. https://doi.org/10.1017/S0266466619000057

This paper considers the problem of testing for an explosive bubble in …nancial data in the presence of time-varying volatility. We propose a sign-based variant of the Phillips, Shi and Yu (2015) test. Unlike the original test, the sign-based test do... Read More about Sign-based Unit Root Tests for Explosive Financial Bubbles in the Presence of Deterministically Time-Varying Volatility.

Testing explosive bubbles with time-varying volatility (2018)
Journal Article
Harvey, D. I., Leybourne, S. J., & Zu, Y. (2019). Testing explosive bubbles with time-varying volatility. Econometric Reviews, 38(10), 1131-1151. https://doi.org/10.1080/07474938.2018.1536099

This paper considers the problem of testing for an explosive bubble in financial data in the presence of time-varying volatility. We propose a weighted least squares-based variant of the Phillips, Wu and Yu (2011) test for explosive autoregressive be... Read More about Testing explosive bubbles with time-varying volatility.

Testing the order of fractional integration of a time series in the possible presence of a trend break at an unknown point (2018)
Journal Article
Iacone, F., Leybourne, S. J., & Taylor, A. R. (2018). Testing the order of fractional integration of a time series in the possible presence of a trend break at an unknown point. Econometric Theory, 35(6), 1201 - 1233. https://doi.org/10.1017/s0266466618000361

We develop a test, based on the Lagrange multiplier [LM] testing principle, for the value of the long memory parameter of a univariate time series that is composed of a fractionally integrated shock around a potentially broken deterministic trend. Ou... Read More about Testing the order of fractional integration of a time series in the possible presence of a trend break at an unknown point.

Real-time monitoring for explosive financial bubbles (2018)
Journal Article
Astill, S., Harvey, D. I., Leybourne, S. J., Sollis, R., & Taylor, A. R. (2018). Real-time monitoring for explosive financial bubbles. Journal of Time Series Analysis, 39(6), 863-891. https://doi.org/10.1111/jtsa.12409

We propose new methods for the real-time detection of explosive bubbles in financial time series. Most extant methods are constructed for a fixed sample of data and, as such, are only appropriate when applied as one-shot tests. Sequential application... Read More about Real-time monitoring for explosive financial bubbles.

A Bootstrap Stationarity Test for Predictive Regression Invalidity (2018)
Journal Article
Georgiev, I., Harvey, D. I., Leybourne, S. J., & Taylor, A. R. (2018). A Bootstrap Stationarity Test for Predictive Regression Invalidity. Journal of Business and Economic Statistics, 37(3), 528-541. https://doi.org/10.1080/07350015.2017.1385467

In order for predictive regression tests to deliver asymptotically valid inference, account has to be taken of the degree of persistence of the predictors under test. There is also a maintained assumption that any predictability in the variable of in... Read More about A Bootstrap Stationarity Test for Predictive Regression Invalidity.

Testing for parameter instability in predictive regression models (2018)
Journal Article
Gorgiev, I., Harvey, D. I., Leybourne, S. J., & Taylor, A. R. (2018). Testing for parameter instability in predictive regression models. Journal of Econometrics, 204(1), https://doi.org/10.1016/j.jeconom.2018.01.005

We consider tests for structural change, based on the SupF and Cramer-von-Mises type statistics of Andrews (1993) and Nyblom (1989), respectively, in the slope and/or intercept parameters of a predictive regression model where the predictors display... Read More about Testing for parameter instability in predictive regression models.

Testing for a unit root against ESTAR stationarity (2017)
Journal Article
Harvey, D. I., Leybourne, S. J., & Whitehouse, E. J. (2018). Testing for a unit root against ESTAR stationarity. Studies in Nonlinear Dynamics and Econometrics, 22(1), https://doi.org/10.1515/snde-2016-0076

In this paper we examine the local power of unit root tests against globally stationary exponential smooth transition autoregressive [ESTAR] alternatives under two sources of uncertainty: the degree of nonlinearity in the ESTAR model, and the presenc... Read More about Testing for a unit root against ESTAR stationarity.

Forecast evaluation tests and negative long-run variance estimates in small samples (2017)
Journal Article
Harvey, D. I., Leybourne, S. J., & Whitehouse, E. J. (2017). Forecast evaluation tests and negative long-run variance estimates in small samples. International Journal of Forecasting, 33(4), https://doi.org/10.1016/j.ijforecast.2017.05.001

In this paper, we show that when computing standard Diebold-Mariano-type tests for equal forecast accuracy and forecast encompassing, the long-run variance can frequently be negative when dealing with multi-step-ahead predictions in small, but empiri... Read More about Forecast evaluation tests and negative long-run variance estimates in small samples.

Tests for an end-of-sample bubble in financial time series (2017)
Journal Article
Astill, S., Harvey, D. I., Leybourne, S. J., & Taylor, R. (in press). Tests for an end-of-sample bubble in financial time series. Econometric Reviews, 36(6-9), https://doi.org/10.1080/07474938.2017.1307490

In this paper we examine the issue of detecting explosive behaviour in economic and financial time series when an explosive episode is both ongoing at the end of the sample, and of finite length. We propose a testing strategy based on the sub-samplin... Read More about Tests for an end-of-sample bubble in financial time series.

Improving the accuracy of asset price bubble start and end date estimators (2016)
Journal Article
Harvey, D. I., Leybourne, S. J., & Sollis, R. (in press). Improving the accuracy of asset price bubble start and end date estimators. Journal of Empirical Finance, 40, https://doi.org/10.1016/j.jempfin.2016.11.001

Recent research has proposed using recursive right-tailed unit root tests to date the start and end of asset price bubbles. In this paper an alternative approach is proposed that utilises model-based minimum sum of squared residuals estimators combin... Read More about Improving the accuracy of asset price bubble start and end date estimators.

Improving the length of confidence sets for the date of a break in level and trend when the order of integration is unknown (2016)
Journal Article
Harvey, D. I., & Leybourne, S. J. (in press). Improving the length of confidence sets for the date of a break in level and trend when the order of integration is unknown. Economics Letters, 145, https://doi.org/10.1016/j.econlet.2016.06.015

Harvey and Leybourne (2015) construct confidence sets for the timing of a break in level and/or trend, based on inverting sequences of test statistics for a break at all possible dates. These are valid, in the sense of yielding correct asymptotic cov... Read More about Improving the length of confidence sets for the date of a break in level and trend when the order of integration is unknown.

The impact of the initial condition on covariate augmented unit root tests (2016)
Journal Article
Aristidou, C., Harvey, D. I., & Leybourne, S. J. (2016). The impact of the initial condition on covariate augmented unit root tests. Journal of Time Series Econometrics, 9(1), https://doi.org/10.1515/jtse-2015-0013

We examine the behaviour of OLS-demeaned/detrended and GLS-demeaned/detrended unit root tests that employ stationary covariates, as proposed by Hansen (1995, “Rethinking the Univariate Approach to Unit Root Testing.” Econometric Theory 11:1148–71) an... Read More about The impact of the initial condition on covariate augmented unit root tests.

Tests of the co-integration rank in VAR models in the presence of a possible break in trend at an unknown point (2016)
Journal Article
Harris, D., Leybourne, S. J., & Taylor, A. R. (2016). Tests of the co-integration rank in VAR models in the presence of a possible break in trend at an unknown point. Journal of Econometrics, 192(2), 451-467. https://doi.org/10.1016/j.jeconom.2016.02.010

In this paper we consider the problem of testing for the co-integration rank of a vector autoregressive process in the case where a trend break may potentially be present in the data. It is known that un-modelled trend breaks can result in tests whi... Read More about Tests of the co-integration rank in VAR models in the presence of a possible break in trend at an unknown point.

Tests for explosive financial bubbles in the presence of non-stationary volatility (2015)
Journal Article
Harvey, D. I., Leybourne, S. J., Sollis, R., & Taylor, A. R. (in press). Tests for explosive financial bubbles in the presence of non-stationary volatility. Journal of Empirical Finance, 38(B), https://doi.org/10.1016/j.jempfin.2015.09.002

This paper studies the impact of permanent volatility shifts in the innovation process on the performance of the test for explosive financial bubbles based on recursive right-tailed Dickey–Fuller-type unit root tests proposed by Phillips, Wu and Yu (... Read More about Tests for explosive financial bubbles in the presence of non-stationary volatility.

Testing for unit roots under multiple possible trend breaks and non-stationary volatility using bootstrap minimum Dickey-Fuller statistics (2015)
Journal Article
Cavaliere, G., Harvey, D. I., Leybourne, S. J., & Robert Taylor, A. (2015). Testing for unit roots under multiple possible trend breaks and non-stationary volatility using bootstrap minimum Dickey-Fuller statistics. Journal of Time Series Analysis, 36(5), https://doi.org/10.1111/jtsa.12067

In a recent paper, Harvey et al. (2013) [HLT] propose a new unit root test that allows for the possibility of multiple breaks in trend. Their proposed test is based on the infimum of the sequence (across all candidate break points) of local GLS detre... Read More about Testing for unit roots under multiple possible trend breaks and non-stationary volatility using bootstrap minimum Dickey-Fuller statistics.

Confidence sets for the date of a break in level and trend when the order of integration is unknown (2015)
Journal Article
Harvey, D. I., & Leybourne, S. J. (2015). Confidence sets for the date of a break in level and trend when the order of integration is unknown. Journal of Econometrics, 184(2), https://doi.org/10.1016/j.jeconom.2014.09.004

We propose methods for constructing confidence sets for the timing of a break in level and/or trend that have asymptotically correct coverage for both I(0) and I(1) processes. These are based on inverting a sequence of tests for the break location, e... Read More about Confidence sets for the date of a break in level and trend when the order of integration is unknown.

Recursive right-tailed unit root tests for an explosive asset price bubble (2015)
Journal Article
Harvey, D. I., Leybourne, S. J., & Sollis, R. (2015). Recursive right-tailed unit root tests for an explosive asset price bubble. Journal of Financial Econometrics, 13(1), https://doi.org/10.1093/jjfinec/nbt025

In this article, we compare the local asymptotic and finite sample power of two recently proposed recursive right-tailed Dickey–Fuller-type tests for an explosive rational bubble in asset prices. It is shown that the power of the two tests can differ... Read More about Recursive right-tailed unit root tests for an explosive asset price bubble.

Robust and powerful tests for nonlinear deterministic components (2014)
Journal Article
Astill, S., Harvey, D. I., Leybourne, S. J., & Taylor, A. M. R. (2014). Robust and powerful tests for nonlinear deterministic components. Oxford Bulletin of Economics and Statistics, 77(6), https://doi.org/10.1111/obes.12079

We develop a test for the presence of nonlinear deterministic components in a univariate time series, approximated using a Fourier series expansion, designed to be asymptotically robust to the order of integration of the process and to any weak depen... Read More about Robust and powerful tests for nonlinear deterministic components.

Break date estimation for models with deterministic structural change (2014)
Journal Article
Harvey, D. I., & Leybourne, S. J. (2014). Break date estimation for models with deterministic structural change. Oxford Bulletin of Economics and Statistics, 76(5), https://doi.org/10.1111/obes.12037

In this article, we consider estimating the timing of a break in level and/or trend when the order of integration and autocorrelation properties of the data are unknown. For stationary innovations, break point estimation is commonly performed by mini... Read More about Break date estimation for models with deterministic structural change.

Robust tests for a linear trend with an application to equity indices (2014)
Journal Article
Astill, S., Harvey, D. I., Leybourne, S. J., & Taylor, A. R. (in press). Robust tests for a linear trend with an application to equity indices. Journal of Empirical Finance, 29, https://doi.org/10.1016/j.jempfin.2014.02.004

In this paper we develop a testing procedure for the presence of a deterministic linear trend in a univariate time series which is robust to whether the series is I(0) or I(1) and requires no knowledge of the form of weak dependence present in the da... Read More about Robust tests for a linear trend with an application to equity indices.

Asymptotic behaviour of tests for a unit root against an explosive alternative (2014)
Journal Article
Harvey, D. I., & Leybourne, S. J. (2014). Asymptotic behaviour of tests for a unit root against an explosive alternative. Economics Letters, 122(1), https://doi.org/10.1016/j.econlet.2013.11.006

We compare the asymptotic local power of upper-tail unit root tests against an explosive alternative based on ordinary least squares (OLS) and quasi-differenced (QD) demeaning/detrending. We find that under an asymptotically negligible initialisation... Read More about Asymptotic behaviour of tests for a unit root against an explosive alternative.

On infimum Dickey–Fuller unit root tests allowing for a trend break under the null (2014)
Journal Article
Harvey, D. I., Leybourne, S. J., & Taylor, A. R. (2014). On infimum Dickey–Fuller unit root tests allowing for a trend break under the null. Computational Statistics and Data Analysis, 78, https://doi.org/10.1016/j.csda.2012.10.017

Trend breaks appear to be prevalent in macroeconomic time series. Consequently, to avoid the catastrophic impact that unmodelled trend breaks have on power, it is standard empirical practice to employ unit root tests which allow for such effects. A p... Read More about On infimum Dickey–Fuller unit root tests allowing for a trend break under the null.

Unit Root Testing under a Local Break in Trend using Partial Information on the Break Date* (2013)
Journal Article
Harvey, D. I., Leybourne, S. J., & Robert Taylor, A. (2014). Unit Root Testing under a Local Break in Trend using Partial Information on the Break Date*. Oxford Bulletin of Economics and Statistics, 76(1), 93-111. https://doi.org/10.1111/obes.12013

We consider unit root testing allowing for a break in trend when partial information is available regarding the location of the break date. This takes the form of knowledge of a relatively narrow window of data within which the break takes place, sho... Read More about Unit Root Testing under a Local Break in Trend using Partial Information on the Break Date*.