A smooth permanent surge process

Andres Gonzalez

No 572, SSE/EFI Working Paper Series in Economics and Finance from Stockholm School of Economics

Abstract: In this paper we introduce the Smooth Permanent Surge [SPS] model. The model is an integrated non lineal moving average process with possibly unit roots in the moving average coefficients. The process nests the Stochastic Permanent Break [STOPBREAK] process by Engle and Smith (1999) and in a limiting case it converges to Threshold Integrated Moving Average [TIMA] models by Gonzalo and Martinez (2003). A test of SPS against STOPBREAK process is presented. Additionally, we introduce a new test for testing SPS process against the random walk. The small sample properties of these tests are

investigated by Monte Carlo experiments. An application to the stock markets is presented.

Keywords: Linearity test; Monte Carlo testing; Smooth transitions; Moving Averages Models; Permanent Shock; Transitory Shocks. (search for similar items in EconPapers)
JEL-codes: C12 C15 C22 C51 C52 (search for similar items in EconPapers)
Pages: 29 pages
Date: 2004-12-07
New Economics Papers: this item is included in nep-ecm and nep-ets
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Persistent link: https://EconPapers.repec.org/RePEc:hhs:hastef:0572

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