Maximum Likelihood Estimation of a Unit Root Bilinear Model with an Application to Prices
We estimate a unit root bilinear process using the Maximum Likelihood method with log-likelihood function constructed by means of the Kalman filter, and evaluate the finite sample properties of this estimator. One hundred and six world-wide price series are tested for unit root bilinearity applying the test suggested by Charemza et al. (2002b). Applying the Maximum Likelihood estimator based on the Kalman filter, the null hypothesis of no bilinearity is rejected for 40 out of 106 series at the 5% level of significance. Most of the significant unit root bilinear coefficient estimates are explosive
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Peel, David & Davidson, James, 1998. "A non-linear error correction mechanism based on the bilinear model1," Economics Letters, Elsevier, vol. 58(2), pages 165-170, February.
- Scheinkman, Jose A & LeBaron, Blake, 1989. "Nonlinear Dynamics and Stock Returns," The Journal of Business, University of Chicago Press, vol. 62(3), pages 311-337, July.
- Maravall, Agustin, 1983. "An Application of Nonlinear Time Series Forecasting," Journal of Business & Economic Statistics, American Statistical Association, vol. 1(1), pages 66-74, January.
- Charemza, Wojciech W. & Lifshits, Mikhail & Makarova, Svetlana, 2005.
"Conditional testing for unit-root bilinearity in financial time series: some theoretical and empirical results,"
Journal of Economic Dynamics and Control,
Elsevier, vol. 29(1-2), pages 63-96, January.
- Charemza W.W. & M. Lifshits & S. Makarova, 2002. "Conditional testing for unit-root bilinearity in financial time series: some theoretical and empirical results," Computing in Economics and Finance 2002 251, Society for Computational Economics.
- Hinich, Melvin J & Patterson, Douglas M, 1985. "Evidence of Nonlinearity in Daily Stock Returns," Journal of Business & Economic Statistics, American Statistical Association, vol. 3(1), pages 69-77, January.
- Goffe, William L. & Ferrier, Gary D. & Rogers, John, 1994. "Global optimization of statistical functions with simulated annealing," Journal of Econometrics, Elsevier, vol. 60(1-2), pages 65-99.
- James G. MacKinnon, 2010.
"Critical Values for Cointegration Tests,"
1227, Queen's University, Department of Economics.
- J. D. Byers & D. A. Peel, 1995. "Bilinear quadratic ARCH and volatility spillovers in inter-war exchange rates," Applied Economics Letters, Taylor & Francis Journals, vol. 2(7), pages 215-219.
When requesting a correction, please mention this item's handle: RePEc:sce:scecf4:47. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Christopher F. Baum)
If references are entirely missing, you can add them using this form.