Nonlinear Dynamic Structures

A. Gallant, Peter Rossi () and George Tauchen ()

Econometrica, 1993, vol. 61, issue 4, 871-907

Abstract: Methods for nonlinear impulse response analysis are introduced. The methods are based on conditional moment profiles defined for a stationary time series. Comparing conditional moment profiles to baseline profiles is the nonlinear analog of conventional impulse-response analysis. The bootstrap may be used for statistical inference. Profile bundles may be examined for evidence of damping or persistence. Application to bivariate NYSE price and volume series from 1928 to 1987 finds evidence of a heavily damped 'leverage effect' and a differential response of trading volume to 'common-knowledge' price shocks. Copyright 1993 by The Econometric Society.

Date: 1993
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