January 2006

Fully Modified Estimation With Nearly Integrated Regressors

Erik Hjalmarsson

Abstract:

I show that the test procedure derived by Campbell and Yogo (2005, Journal of Financial Economics, forthcoming) for regressions with nearly integrated variables can be interpreted as the natural t-test resulting from a fully modified estimation with near-unit-root regressors. This clearly establishes the methods of Campbell and Yogo as an extension of previous unit-root results.

Full paper (screen reader version)

Keywords: Fully modified estimation, Near-unit-roots, Predictive regressions

PDF: Full Paper

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