The Financial Econometrics Seminar: 
Time: 11:30 pm
Date: 17th of February 2022

Ibragimov, Rustam (Imperial College London) “New Approaches to Robust Inference on Market (Non-)Efficiency, Volatility Clustering and Nonlinear Dependence”. ”

Abstract : Many financial and economic variables, including financial returns, exhibit nonlinear dependence, heterogeneity and heavy-tailedness. These properties may make problematic the analysis of (non-)efficiency and volatility clustering in economic and financial markets using traditional approaches that appeal to asymptotic normality of sample autocorrelation functions of returns and their squares.

This paper presents new approaches to deal with the above problems. We provide the results that motivate the use of measures of market (non-)efficiency and volatility clustering based on (small) powers of absolute returns and their signed versions.

We further provide new approaches to robust inference on the measures in the case of general time series, including GARCH-type processes. The approaches are based on robust t−statistics tests and new results on their applicability are presented. In the approaches, parameter estimates (e.g., estimates of measures of nonlinear dependence) are computed for groups of data, and the inference is based on t−statistics in the resulting group estimates. This results in valid robust inference under heterogeneity and dependence assumptions satisfied in real-world financial markets. Numerical results and empirical applications confirm the advantages and wide applicability of the proposed approaches.

Joint work : Anton SKROBOTOV (Russian Academy of National Economy and Public Administration under the President of the Russian Federation (RANEPA) – Department of Economics) and Rasmus PEDERSEN (University of Copenhagen)

 

Organizers:

Jean-Michel ZAKOIAN  (CREST)

Sponsors:
CREST