Philip Rothman

Time Irreversibility and Business Cycle Asymmetry

The problem of business-cycle symmetry is addressed within the context of time reversibility. To this effect, the authors introduce a time domain test of time reversibility, the TR test. In an application, they show that time irreversibility is the rule rather than the exception for two well-known representative macroeconomic data sets. This shows that many components of the business cycle have asymmetric fluctuations. The characterization of asymmetry provided by the TR test shows that many series exhibit steepness asymmetry. A few series appear to be either deep or sharp. Copyright 1996 by Ohio State University Press.

Forecasting Asymmetric Unemployment Rates

Asymmetric behavior has been documented in postwar quarterly U.S. unemployment rates. This suggests that improvement over conventional linear forecasts may be possible through the use of nonlinear time-series models. In this note an out-of-sample forecasting competition is carried out for a set of leading nonlinear time-series models. It is shown that several nonlinear forecasts do indeed dominate the linear forecast. The results are sensitive, however, to whether a stationarity-inducing transformation is applied to the nonstationary unemployment rate series.

The Statistical Properties of Dimension Calculations Using Small Data Sets: Some Economic Applications

Several recent attempts have been made to test for chaos in economic time series through dimension calculations. Relative to the large data sets used in the natural sciences, economic time series are small. Using a procedure developed by J. B. Ramsey and H. Yuan, the authors show that, with the techniques available to date and for the time series examined so far, there is virtually no evidence for the presence of simple chaotic attractors. Copyright 1990 by Economics Department of the University of Pennsylvania and the Osaka University Institute of Social and Economic Research Association.

Further evidence on the asymmetric behavior of unemployment rates over the business cycle

Abstract Sichel recently reported that Neftcis claim to have found evidence in favor of asymmetry in the quarterly aggregate unemployment rate was based on an error. Using a modified version of Neftcis test, this paper is the first to report evidence of such asymmetry using a Markov procedure. The test is then applied to a group of quarterly sectoral unemployment rates. The results suggest that the primary source of asymmetry in the aggregate unemployment rate is the cyclical behavior of the unemployment rate in the manufacturing sector.

Nonlinear Time Series Analysis of Economic and Financial Data

Introduction P. Rothman. 1. Business Cycle Turning Points: Two Empirical Business Cycle Model Approaches A.J. Filardo, S.F. Gordon. 2. A Markov Switching Cookbook B. Mizrach, J. Watkins. 3. A Reanalysis of the Spectral Properties of Some Economic and Financial Time Series J.B. Ramsey, D.J. Thomson. 4. Nonlinear Econometric Modelling: A Selective Review N.R. Swanson, P.H. Franses. 5. Unit-Root Tests and Excess Returns M.-J. Godbout, S. van Norden. 6. On the Inherent Nonlinearity of Frequency Dependent Time Series Relationships Hui Boon Tan, R. Ashley. 7. Stationarity Tests with Multiple Endogenized Breaks Junsoo Lee. 8. Nonlinear Evolution in UK Stock Returns and Volume C. Brooks, et al. 9. Nonlinear Adjustment Towards Long-Run Money Demand P. Michael, et al. 10. Asymmetric Nonlinear Smooth Transition Garch Models H.M. Anderson, et al. 11. Testing the Present Value Hypothesis from a Vector Autoregression with Stochastic Regime Switching J. Driffill, M. Sola. 12. Business Cycle Dynamics: Predicting Transitions with Macrovariables M.O. Ravn, M. Sola. 13. Searching for the Sources of Arch Behavior: Testing the Mixture of Distributions Model P. de Fontnouvelle. 14. Improved Testing and Specification of Smooth Transition Regression Models A. Escribano, O. Jorda. 15. Speculative Behavior, Regime-Switching, and Stock Market Crashes S. van Norden, H. Schaller. 16. Higher-Order Residual Analysis for Simple Bilinear and Threshold Autoregressive Models with the TR Test P. Rothman.Index.

An empirical investigation of stock market behavior in the Middle East and North Africa

This paper analyzes excess market returns in the relatively understudied financial markets of nine Middle Eastern and North African (MENA) countries within the context of three variants of the Capital Asset Pricing Model: the static international CAPM; the constant-parameter intertemporal CAPM; and a Markov-switching intertemporal CAPM which allows for the degree of integration with international equity markets to be time-varying. On the whole we find that: (1) Israel and Turkey are most strongly integrated with world financial markets; (2) in most other MENA markets examined there is primarily local pricing of risk and evidence of a positive risk-return trade-off; and (3) there is substantial time variation in the weights on local and global pricing of risk for all of these markets. Our results suggest that investment in many of these markets over the sample studied would have provided returns uncorrelated with global markets, and thus would have served as financial instruments with which portfolio diversification could have been improved.

Fractional integration analysis of long-run behavior for US macroeconomic time series

Abstract We apply a new ARFIMA approach to distinguish between the trend and difference stationary models of long-run dynamics for a well-known representative macroeconomic dataset. Our results strengthen the case for the difference stationary model for these series.

More Uncertainty About the Unit Root in U.S. Real GNP

The new KPSS test is used to test the null hypothesis that U.S. real GNP is a trend stationary process. When appropriately sized, the test fails to reject the trend stationary null. This provides an important counter-example to the generic inability to reject the difference stationary null hypothesis for output by classical hypothesis testing. The evidence in favor of the trend stationary representation is weakened, however, by showing that such size correction dramatically reduces power. Reversing the null and alternative hypotheses, this paper complements Rudebuschs (1993) recent analysis.

Higher-Order Residual Analysis for Simple Bilinear and Threshold Autoregressive Models with the TR Test

Linear models have traditionally dominated the time series analysis of macroeconomic and financial data. Evidence of nonlinear behavior in the dynamic behavior of such data would imply that the conventional linear models are misspecified. As a result of such model misspecification, appropriately specified nonlinear forecasts would generally be superior to the optimal linear forecast.

A reappraisal of parity reversion for UK real exchange rates

We apply a new approach to test the long-run purchasing power parity theory of real exchange rate movements for the UK. The question of whether real exchange rates have a unit root or are mean reverting is set in the more general framework of fractionally differenced time-series models. Our results suggest that in the current period of floating rates, UK real exchange rates return to parity in the long run.