1,661 research outputs found

    Testing the Martingale Difference Hypothesis Using Neural Network Approximations

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    The martingale difference restriction is an outcome of many theoretical analyses in economics and finance. A large body of econometric literature deals with tests of that restriction. We provide new tests based on radial basis function neural networks. Our work is based on the test design of Blake and Kapetanios (2000, 2003a,b). However, unlike that work we can provide a formal theoretical justification for the validity of these tests using approximation results from Kapetanios and Blake (2007). These results take advantage of the link between the algorithms of Blake and Kapetanios (2000, 2003a,b) and boosting. We carry out a Monte Carlo study of the properties of the new tests and find that they have superior power performance to all existing tests of the martingale difference hypothesis we consider. An empirical application to the S&P500 constituents illustrates the usefulness of our new test.Martingale difference hypothesis, Neural networks, Boosting

    Testing for ARCH in the Presence of Nonlinearity of Unknown Form in the Conditional Mean

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    Tests of ARCH are a routine diagnostic in empirical econometric and financial analysis. However, it is well known that misspecification of the conditional mean may lead to spurious rejections of the null hypothesis of no ARCH. Nonlinearity is a prime example of this phenomenon. There is little work on the extent of the effect of neglected nonlinearity on the properties of ARCH tests. This paper provides some such evidence and also new ARCH testing procedures that are robust to the presence of neglected nonlinearity. Monte Carlo evidence shows that the problem is serious and that the new methods alleviate this problem to a very large extent.Nonlinearity, ARCH, Neural networks

    Sharing longevity risk: Why governments should issue longevity bonds

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    Government-issued longevity bonds would allow longevity risk to be shared efficiently and fairly between generations. In exchange for paying a longevity risk premium, the current generation of retirees can look to future generations to hedge their aggregate longevity risk. There are also wider social benefits. Longevity bonds will lead to a more secure pension savings market - both defined contribution and defined benefit - together with a more efficient annuity market resulting in less means-tested benefits and a higher tax take. The emerging capital market in longevity-linked instruments can get help to kick start market participation through the establishment of reliable longevity indices and key price points on the longevity risk term structure and can build on this term structure with liquid longevity derivatives.Longevity Risk; Longevity Bonds; Public Policy; Political Economy

    Listening to Identity: Music in 21st century Ireland

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    This paper firstly reviews recent scholarship on music and identity in Ireland. The review detects and discusses a set of issues around the identification of genre and nationality in a country which continues to experience a rapidly changing population structure, against which the mapping of a communal Irishness onto existing categories such as ‘traditional music’ becomes increasingly difficult. Against the grain of this recent scholarship, the paper argues that, in a postmodern and globalised consumer culture, one of the principal locations of music’s affect is through music synchronised to advertising. Having examined the musical content of a number of television advertisements, the paper concludes that the global culture they represent indicates the comparative dis-location of music, identity and Irishness