The small sample performance of Granger causality tests under different model dimensions, degree of cointegration, direction of causality, and system stability are presented. Two tests based on maximum likelihood estimation of error‐correction models (LR and WALD) are compared to a Wald test based on multivariate least squares estimation of a modified VAR (MWALD). In large samples all test statistics perform well in terms of size and power. For smaller samples, the LR and WALD tests perform better than the MWALD test. Overall, the LR test outperforms the other two in terms of size and power in small samples.
nterest has long existed among followers of commodity futures markets about the I relationship between trading volume and price variability. Critics of futures markets argue that increased trading vohme, especially by speculators, leads to increased price volatility. This can lead to greater uncertainty and less market efficiency, suggesting that regulatory limits curbing speculative positions and daily trading activities be established.Others argue that increased price variability due to changing economic conditions attracts more trading, creating more market liquidity and leading eventually to less price volatility than if volume did not increase. This suggests that there be less regulation of traders and their activities.In between these scenarios is the one where daily trading activity and price volatility increase and decrease simultaneously. That is, one activity does not necessarily lead or lag the other, but that they move up and down in concert as economic conditions change. A high degree of simultaneity between volume and price changes can indicate liquid and efficient markets where the response to new information is nearly instantaneous.
The Environmental Kuznets Curve (EKC) on water pollution was investigated with both semiparametric and parametric models using watershed level data for the state of Louisiana, USA. The parametric model indicated the turning points within the range $10241–$12993, $6636–$13877, and $6467–$12758 for nitrogen (N), phosphorus (P), and dissolved oxygen (DO), respectively. However, only the parameters associated with N EKC were found to be significant. Model specification tests rejected parametric models in favor of semiparametric specification for P but not for N and DO. Copyright Springer 2005environmental Kuznets curve, fixed and random effects, parametric and semiparametric models, water pollution, watershed, turning points, C14, C33, O13, Q2, Q25,
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