The Power of Bootstrap Tests of Cointegration Rank with Financial Time Series

Bootstrap likelihood ratio tests of cointegration rank are commonly used because they tend to have rejection probabilities that are closer to the nominal level than the rejection probabilities of the correspond- ing asymptotic tests. The e¤ect of bootstrapping the test on its power is largely unknown. We show that a new computationally inexpensive procedure can be applied to the estimation of the power function of the bootstrap test of cointegration rank. The bootstrap test is found to have a power function close to that of the level-adjusted asymp- totic test. The bootstrap test estimates the level-adjusted power of the asymptotic test highly accurately. The bootstrap test may have low power to reject the null hypothesis of cointegration rank zero, or underestimate the cointegration rank. An empirical application to Euribor interest rates is provided as an illustration of the findings.

Tests for Cointegration Rank and the Initial Condition

Many economic events involve initial observations that substantially deviate from long-run steady state. Initial conditions of this type have been found to impact diversely on the power of univariate unit root tests, whereas the impact on multivariate tests is largely unknown. This paper investigates the impact of the initial condition on tests for cointegration rank. We compare the local power of the widely used likelihood ratio (LR) test with the local power of a test based on the eigenvalues of the companion matrix. We find that the power of the LR test is increasing in the magnitude of the initial condition, whereas the power of the other test is decreasing. The behaviour of the tests is investigated in an application to price convergence.

Occupational chronic solvent encephalopathy in Finland 1995 - 2007 : incidence and diagnostic methods

The occurrence of occupational chronic solvent encephalopathy (CSE) seems to decrease, but still every year reveals new cases. To prevent CSE and early retirement of solvent-exposed workers, actions should focus on early CSE detection and diagnosis. Identifying the work tasks and solvent exposure associated with high risk for CSE is crucial. Clinical and exposure data of all the 128 cases diagnosed with CSE as an occupational disease in Finland during 1995-2007 was collected from the patient records at the Finnish Institute of Occupational Health (FIOH) in Helsinki. The data on the number of exposed workers in Finland were gathered from the Finnish Job-exposure Matrix (FINJEM) and the number of employed from the national workforce survey. We analyzed the work tasks and solvent exposure of CSE patients and the findings in brain magnetic resonance imaging (MRI), quantitative electroencephalography (QEEG), and event-related potentials (ERP). The annual number of new cases diminished from 18 to 3, and the incidence of CSE decreased from 8.6 to 1.2 / million employed per year. The highest incidence of CSE was in workers with their main exposure to aromatic hydrocarbons; during 1995-2006 the incidence decreased from 1.2 to 0.3 / 1 000 exposed workers per year. The work tasks with the highest incidence of CSE were floor layers and lacquerers, wooden surface finishers, and industrial, metal, or car painters. Among 71 CSE patients, brain MRI revealed atrophy or white matter hyperintensities or both in 38% of the cases. Atrophy which was associated with duration of exposure was most frequently located in the cerebellum and in the frontal or parietal brain areas. QEEG in a group of 47 patients revealed increased power of the theta band in the frontal brain area. In a group of 86 patients, the P300 amplitude of auditory ERP was decreased, but at individual level, all the amplitude values were classified as normal. In 11 CSE patients and 13 age-matched controls, ERP elicited by a multimodal paradigm including an auditory, a visual detection, and a recognition memory task under single and dual-task conditions corroborated the decrease of auditory P300 amplitude in CSE patients in single-task condition. In dual-task conditions, the auditory P300 component was, more often in patients than in controls, unrecognizable. Due to the paucity and non-specificity of the findings, brain MRI serves mainly for differential diagnostics in CSE. QEEG and auditory P300 are insensitive at individual level and not useful in the clinical diagnostics of CSE. A multimodal ERP paradigm may, however, provide a more sensitive method to diagnose slight cognitive disturbances such as CSE.