Time Series Models in Non‐Normal Situations: Symmetric Innovations

Tiku, M. L.; Wong, Wing-Keung; Vaughan, David; Bian, Guorui

doi:10.1111/1467-9892.00199

Cited by 127 publications

(95 citation statements)

References 21 publications

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“…The concept of cointegration, which is used to analyze if variables share a long-run equilibrium relationship will be used in our study. In order to test for cointegration, a unit root test [see Dickey and Fuller (1981), Hamilton (1994), Tiku and Wong (1998) and Tiku et al (2000)], (Dickey Fuller and Augmented Dickey Fuller tests) first has to be performed to confirm that the variables are indeed stationary. Cointegration tests, which are important in determining the presence and nature of an equilibrium economic relation, was first introduced by Granger (1981) and later developed by Granger (1987).…”

Section: Methodsmentioning

confidence: 99%

The relationship between stock markets of major developed countries and Asian emerging markets

Wong

Penm

Terrell

et al. 2004

Journal of Applied Mathematics and Decision Sciences

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Abstract. With the emergence of new capital markets and liberalization of stock markets in recent years, there has been an increase in investors' interest in international diversification. This is so because international diversification allows investors to have a larger basket of foreign securities to choose from as part of their portfolio assets, so as to enhance the reward-to-volatility ratio. This benefit would be limited if national equity markets tend to move together in the long run. This paper thus studies the issue of co-movement between stock markets in major developed countries and those in Asian emerging markets using the concept of cointegration. We find that there is co-movement between some of the developed and emerging markets, but some emerging markets do differ from the developed markets with which they share a long-run equilibrium relationship. Furthermore, it has been observed that there has been increasing interdependence between most of the developed and emerging markets since the 1987 Stock Market Crash. This interdependence intensified after the 1997 Asian Financial Crisis. With this phenomenon of increasing co-movement between developed and emerging stock markets, the benefits of international diversification become limited.

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Section: Methodsmentioning

confidence: 99%

The relationship between stock markets of major developed countries and Asian emerging markets

Wong

Penm

Terrell

et al. 2004

Journal of Applied Mathematics and Decision Sciences

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“…To prove otherwise, Levy and Wiener (1998) recommend employing the subjective weighting functions. We would suggest applying the Bayesian approach (Matsumura, et al 1990) and then use the advanced statistical techniques (see for example, Wong and Miller 1990;Tiku et al 2000;Wong and Bian 2005) to estimate the subjectively distort probabilities. Prospect theory will satisfy the Bayesian expected utility maximization.…”

Section: Discussionmentioning

confidence: 99%

Prospect and Markowitz stochastic dominance

2007

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Levy and Levy ( , 2004 develop the Prospect and Markowitz stochastic dominance theory with S-shaped and reverse S-shaped utility functions for investors. In this paper, we extend Levy and Levy's Prospect Stochastic Dominance theory (PSD) and Markowitz Stochastic Dominance theory (MSD) to the first three orders and link the corresponding S-shaped and reverse S-shaped utility functions to the first three orders. We also provide experiments to illustrate each case of the MSD and PSD to the first three orders and demonstrate that the higher order MSD and PSD cannot be replaced by the lower order MSD and PSD.Prospect theory has been regarded as a challenge to the expected utility paradigm. Levy and prove that the second order PSD and MSD satisfy the expected utility paradigm. In our paper we take Levy and Levy's results one step further by showing that both PSD and MSD of any order are consistent with the expected utility paradigm.Furthermore, we formulate some other properties for the PSD and MSD including the hierarchy that exists in both PSD and MSD relationships; arbitrage opportunities that exist in the first orders of both PSD and MSD; and that for any two prospects under certain conditions, their third order MSD preference will be 'the opposite' of or 'the same' as their counterpart third order PSD preference. By extending Levy and Levy's work, we provide investors with more tools for empirical analysis, with which they can identify the first order PSD and MSD prospects and discern arbitrage opportunities that could increase his/her utility as well as wealth and set up a zero dollar portfolio to make huge profit. Our tools also enable investors to identify the third order PSD and MSD prospects and make better choices.

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“…Tiku, Wong, Vaughan, and Bian (2000) consider AR(q) models for time series data with nonnormal innovations that are represented by a member of a wide family of symmetric Student's t distributions. As the ML (maximum likelihood) estimators are intractable, the authors derive the MML (modified maximum likelihood) estimators of the parameters, and show that they are efficient.…”

Section: Other Econometric Models/testsmentioning

confidence: 99%

“…Tiku, Wong, Vaughan, and Bian (2000) consider AR(q) models for time series data with non-normal innovations that are represented by a member of a wide family of symmetric Student's t distributions. The authors derive the MML estimators of the parameters and show that they are efficient, use the estimators for hypothesis testing, and conduct simulation experiments to show that the resulting tests are robust and powerful.…”

Section: Other Econometric Models/testsmentioning

confidence: 99%

Decision Sciences, Economics, Finance, Business, Computing, and Big Data: Connections

2018

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This paper provides a review of some connecting literature in Decision Sciences, Economics, Finance, Business, Computing, and Big Data. We then discuss some research that is related to the six cognate disciplines. Academics could develop theoretical models and subsequent econometric and statistical models to estimate the parameters in the associated models. Moreover, they could then conduct simulations to examine whether the estimators or statistics in the new theories on estimation and hypothesis have small size and high power. Thereafter, academics and practitioners could then apply their theories to analyze interesting problems and issues in the six disciplines and other cognate areas. KeywordsDecision sciences, economics, finance, business, computing, and big data, theoretical models, econometric and statistical models, applications. JEL Classification AbstractThis paper provides a review of some connecting literature in Decision Sciences, Economics, Finance, Business, Computing, and Big Data. We then discuss some research that is related to the six cognate disciplines. Academics could develop theoretical models and subsequent econometric and statistical models to estimate the parameters in the associated models. Moreover, they could then conduct simulations to examine whether the estimators or statistics in the new theories on estimation and hypothesis have small size and high power. Thereafter, academics and practitioners could then apply their theories to analyze interesting problems and issues in the six disciplines and other cognate areas.

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Time Series Models in Non‐Normal Situations: Symmetric Innovations

Cited by 127 publications

References 21 publications

The relationship between stock markets of major developed countries and Asian emerging markets

The relationship between stock markets of major developed countries and Asian emerging markets

Prospect and Markowitz stochastic dominance

Decision Sciences, Economics, Finance, Business, Computing, and Big Data: Connections

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