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607
The local power of some unit root tests for panel data
 Advances in Econometrics, Vol. 15: Nonstationary Panels, Panel Cointegration, and Dynamic Panels, JAI
, 2000
"... To test the hypothesis of a di erence stationary time series against a trend stationary alternative, Levin and Lin (1993) and Im, Pesaran and Shin (1997) suggest bias adjusted tstatistics. Such corrections are necessary to account for the nonzero mean of the tstatistic in the case of an OLS detren ..."
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Cited by 250 (2 self)
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To test the hypothesis of a di erence stationary time series against a trend stationary alternative, Levin and Lin (1993) and Im, Pesaran and Shin (1997) suggest bias adjusted tstatistics. Such corrections are necessary to account for the nonzero mean of the tstatistic in the case of an OLS detrending method. In this paper the local power of panel unit root statistics against a sequence of local alternatives is studied. It is shown that the local power of the test statistics is a ected by two di erent terms. The rst term represents the asymptotic e ect on the bias due the detrending method and the second term is the usual location parameter of the limiting distribution under the sequence of local alternatives. It is argued that both terms can o set each other so that the test has no power against the sequence of local alternatives. This results suggest to construct test statistics based on alternative detrending methods. We consider a class of tstatistics that do not require a bias correction. The results of a Monte Carlo experiment suggest that avoiding the bias can improve the power of the test substantially. 1 1
Testing for a Unit Root in Panels with Dynamic Factors
 Journal of Econometrics
, 2002
"... This paper studies testing for a unit root for large n and T panels in which the crosssectional units are correlated. To model this crosssectional correlation, we assume that the data is generated by an unknown number of unobservable common factors. We propose unit root tests in this environment a ..."
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Cited by 181 (6 self)
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This paper studies testing for a unit root for large n and T panels in which the crosssectional units are correlated. To model this crosssectional correlation, we assume that the data is generated by an unknown number of unobservable common factors. We propose unit root tests in this environment and derive their (Gaussian) asymptotic distribution under the null hypothesis of a unit root and local alternatives. We show that these tests have significant asympotitic power when the model has no incidental trends. However, when there are incidental trends in the model and it is necessary to remove heterogeneous deterministic components, we show that these tests have no power against the same local alternatives. Through Monte Carlo simulations, we provide evidence on the finite sample properties of these new tests. 1
Stock return predictability: Is it there?
, 2001
"... We ask whether stock returns in France, Germany, Japan ... by three instruments: the dividend yield, the earnings yield and the short rate. The predictability regression is suggested by a present value model with earnings growth, payout ratios and the short rate as state variables. We find the short ..."
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Cited by 127 (5 self)
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We ask whether stock returns in France, Germany, Japan ... by three instruments: the dividend yield, the earnings yield and the short rate. The predictability regression is suggested by a present value model with earnings growth, payout ratios and the short rate as state variables. We find the short rate to be the only robust shortrun predictor of excess returns, and find little evidence of excess return predictability by earnings or dividend yields across all countries. There is no evidence of longhorizon return predictability once we account for finite sample influence. Crosscountry predictability is stronger than predictability using local instruments. Finally, dividend and earnings yields predict future cashflow growth
Identification, Weak Instruments, and Statistical Inference in Econometrics
 JOURNAL OF ECONOMICS
, 2003
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Does the TimeConsistency Problem Explain the Behavior of Inflation in the United States?
 JOURNAL OF MONETARY ECONOMICS
, 1999
"... This paper derives the restrictions imposed by Barro and Gordon's theory of timeconsistent monetary policy on a bivariate timeseries model for inflation and unemployment and tests those restrictions using quarterly US data from 1960 through 1997. The results show that the data are consistent ..."
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Cited by 90 (4 self)
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This paper derives the restrictions imposed by Barro and Gordon's theory of timeconsistent monetary policy on a bivariate timeseries model for inflation and unemployment and tests those restrictions using quarterly US data from 1960 through 1997. The results show that the data are consistent with the theory's implications for the longrun behavior of the two variables, indicating that the theory can explain inflation's initial rise and subsequent fall over the past four decades. The results also suggest that the theory must be extended to account more fully for the shortrun dynamics that appear in the data.
Elements of Forecasting
"... Most good texts arise from the desire to leave one's stamp on a discipline by training future generations of students, coupled with the recognition that existing texts are inadequate in various respects. My motivation is no different. There is a real need for a concise and modern introductory f ..."
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Cited by 88 (4 self)
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Most good texts arise from the desire to leave one's stamp on a discipline by training future generations of students, coupled with the recognition that existing texts are inadequate in various respects. My motivation is no different. There is a real need for a concise and modern introductory forecasting text. A number of features distinguish this book. First, although it uses only elementary mathematics, it conveys a strong feel for the important advances made since the work of Box and Jenkins more than thirty years ago. In addition to standard models of trend, seasonality, and cycles, it touches – sometimes extensively – upon topics such as: data mining and insample overfitting statistical graphics and exploratory data analysis model selection criteria recursive techniques for diagnosing structural change nonlinear models, including neural networks regimeswitching models unit roots and stochastic trends
Purchasing Power Parity and the Real Exchange Rate
, 2002
"... We assess the progress made by the profession in understanding real exchange rate behavior through a selective and critical, but nonetheless expository, review of the literature. Our reading of the literature leads us to the main conclusions that purchasing power parity might be viewed as a valid lo ..."
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Cited by 65 (4 self)
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We assess the progress made by the profession in understanding real exchange rate behavior through a selective and critical, but nonetheless expository, review of the literature. Our reading of the literature leads us to the main conclusions that purchasing power parity might be viewed as a valid longrun international parity condition when applied to bilateral exchange rates obtaining among major industrialized countries, and that mean reversion in real exchange rates displays significant nonlinearities. However, further work investigating the effects of real shocks on the longrun equilibrium level also seems warranted.
Investor Overconfidence and Trading Volume
 Review of Financial Studies
, 2006
"... EFA conferences. Meir Statman acknowledges support from the Dean Witter Foundation. We ..."
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Cited by 62 (0 self)
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EFA conferences. Meir Statman acknowledges support from the Dean Witter Foundation. We
Minimum LM Unit Root Test with Two Structural Breaks
"... The twobreak unit root test of Lumsdaine and Papell (1997) is examined and found to suffer from bias and spurious rejections in the presence of structural breaks under the null. A twobreak minimum LM unit root test is proposed as a remedy. The twobreak LM test does not suffer from bias and spurio ..."
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Cited by 59 (5 self)
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The twobreak unit root test of Lumsdaine and Papell (1997) is examined and found to suffer from bias and spurious rejections in the presence of structural breaks under the null. A twobreak minimum LM unit root test is proposed as a remedy. The twobreak LM test does not suffer from bias and spurious rejections and is mostly invariant to the size, location, and misspecification of the breaks. We test the Nelson and Plosser (1982) data and find fewer rejections of the unit root than Lumsdaine and Papell. JEL classification: C12, C15, and C22 Key words: Lagrange Multiplier, Unit Root Test, Structural Break, and Endogenous Break Corresponding author: Junsoo Lee, Associate Professor, Department of Economics, University of Central Florida, Orlando, FL, 328161400, USA. Telephone: 4078232070. Fax: 4078233269. Email: Junsoo.Lee@bus.ucf.edu. We thank John List for helpful comments. 1 1.