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Political regimes, business cycles, seasonalities, and returns

Powell, John G; Shi, Jing; Smith, Tom; Whaley, Robert

Description

This paper provides a method for testing for regime differences when regimes are long-lasting. Standard testing procedures are generally inappropriate because regime persistence causes a spurious regression problem - a problem that has led to incorrect inference in a broad range of studies involving regimes representing political, business, and seasonal cycles. The paper outlines analytically how standard estimators can be adjusted for regime dummy variable persistence. While the adjustments...[Show more]

CollectionsANU Research Publications
Date published: 2009
Type: Journal article
URI: http://hdl.handle.net/1885/33865
Source: Journal of Banking and Finance
DOI: 10.1016/j.jbankfin.2008.12.009

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