Nelson, Charles R.
Overview
Works:  25 works in 183 publications in 4 languages and 4,700 library holdings 

Genres:  History 
Roles:  Author, Honoree 
Publication Timeline
.
Most widely held works by
Charles R Nelson
Statespace models with regime switching : classical and Gibbssampling approaches with applications by
ChangJin Kim(
)
21 editions published between 1999 and 2008 in English and held by 2,242 WorldCat member libraries worldwide
Both statespace models and Markovswitching models have been highly productive paths for empirical research in macroeconomics and finance. This book presents recent advances in econometric methods that make feasible the estimation of models that have both features. One approach, in the classical framework, approximates the likelihood function; the other, in the Bayesian framework, uses Gibbssampling to simulate posterior distributions from data
21 editions published between 1999 and 2008 in English and held by 2,242 WorldCat member libraries worldwide
Both statespace models and Markovswitching models have been highly productive paths for empirical research in macroeconomics and finance. This book presents recent advances in econometric methods that make feasible the estimation of models that have both features. One approach, in the classical framework, approximates the likelihood function; the other, in the Bayesian framework, uses Gibbssampling to simulate posterior distributions from data
Applied time series analysis for managerial forecasting by
Charles R Nelson(
Book
)
19 editions published between 1973 and 1984 in English and Italian and held by 793 WorldCat member libraries worldwide
19 editions published between 1973 and 1984 in English and Italian and held by 793 WorldCat member libraries worldwide
The investor's guide to economic indicators by
Charles R Nelson(
Book
)
13 editions published between 1987 and 1990 in English and Undetermined and held by 519 WorldCat member libraries worldwide
13 editions published between 1987 and 1990 in English and Undetermined and held by 519 WorldCat member libraries worldwide
The term structure of interest rates by
Charles R Nelson(
Book
)
16 editions published between 1969 and 1972 in English and Spanish and held by 420 WorldCat member libraries worldwide
16 editions published between 1969 and 1972 in English and Spanish and held by 420 WorldCat member libraries worldwide
A Markov model of heteroskedasticity, risk, and learning in the stock market by
Christopher M Turner(
)
11 editions published between 1988 and 1989 in English and held by 62 WorldCat member libraries worldwide
Risk premia in the stock market are assumed to move with time varying risk. We present a model in which the variance of time excess return of a portfolio depends on a state variable generated by a firstorder Markov process. A model in which the realization of the state is known to economic agents, but unknown to the econometrician. is estimated. The parameter estimates are found to imply that time risk premium declines as time variance of returns rises. We then extend the model to allow agents to be uncertain about time state. Agents make their decisions in period t using a prior distribution of time state based only on past realizations of the excess return through period t1 plus knowledge of the structure of the model. These parameter estimates from this model are consistent with asset pricing theory
11 editions published between 1988 and 1989 in English and held by 62 WorldCat member libraries worldwide
Risk premia in the stock market are assumed to move with time varying risk. We present a model in which the variance of time excess return of a portfolio depends on a state variable generated by a firstorder Markov process. A model in which the realization of the state is known to economic agents, but unknown to the econometrician. is estimated. The parameter estimates are found to imply that time risk premium declines as time variance of returns rises. We then extend the model to allow agents to be uncertain about time state. Agents make their decisions in period t using a prior distribution of time state based only on past realizations of the excess return through period t1 plus knowledge of the structure of the model. These parameter estimates from this model are consistent with asset pricing theory
Some further results on the exact small sample properties of the instrumental variable estimator by
Charles R Nelson(
)
6 editions published in 1988 in English and held by 59 WorldCat member libraries worldwide
Abstract: New results on the exact small sample distribution of the instrumental variable estimator are presented by studying an important special case. The exact closed forms for the probability density and cumulative distribution functions are given. There are a number of surprising findings. The small sample distribution is bimodal. with a point of zero probability mass. As the asymptotic variance grows large, the true distribution becomes concentrated around this point of zero mass. The central tendency of the estimator may be closer to the biased least squares estimator than it is to the true parameter value. The first and second moments of the IV estimator are both infinite. In the case in which least squares is biased upwards, and most of the mass of the IV estimator lies to the right of the true parameter, the mean of the IV estimator is infinitely negative. The difference between the true distribution and the normal asymptotic approximation depends on the ratio of the asymptotic variance to a parameter related to the correlation between the regressor and the regression, error. In particular, when the instrument is poorly correlated with the regressor, the asymptotic approximation to the distribution of the instrumental variable estimator will not be very accurate
6 editions published in 1988 in English and held by 59 WorldCat member libraries worldwide
Abstract: New results on the exact small sample distribution of the instrumental variable estimator are presented by studying an important special case. The exact closed forms for the probability density and cumulative distribution functions are given. There are a number of surprising findings. The small sample distribution is bimodal. with a point of zero probability mass. As the asymptotic variance grows large, the true distribution becomes concentrated around this point of zero mass. The central tendency of the estimator may be closer to the biased least squares estimator than it is to the true parameter value. The first and second moments of the IV estimator are both infinite. In the case in which least squares is biased upwards, and most of the mass of the IV estimator lies to the right of the true parameter, the mean of the IV estimator is infinitely negative. The difference between the true distribution and the normal asymptotic approximation depends on the ratio of the asymptotic variance to a parameter related to the correlation between the regressor and the regression, error. In particular, when the instrument is poorly correlated with the regressor, the asymptotic approximation to the distribution of the instrumental variable estimator will not be very accurate
Predictable stock returns : reality or statistical illusion? by
Charles R Nelson(
)
5 editions published in 1990 in English and held by 59 WorldCat member libraries worldwide
Abstract: fundamental such as the price/dividend ratio is a statistical proxy for lagged
5 editions published in 1990 in English and held by 59 WorldCat member libraries worldwide
Abstract: fundamental such as the price/dividend ratio is a statistical proxy for lagged
The timevaryingparameter model as an alternative to arch for modeling changing conditional variance : the case of Lucas
hypothesis by
Charles R Nelson(
)
7 editions published in 1988 in English and held by 58 WorldCat member libraries worldwide
The main econometric issue in testing the Lucas hypothesis (1973) in a times series context is the estimation of the variance conditional on past information. The ARCH model, proposed by Engle (1982), is one way of specifying the conditional variance. But the assumption underlying the ARCH specification is adhoc. The existence of ARCH can sometimes be interpreted as evidence of misspecification. Under the assumption that a monetary policy regime is continuously changing, a timevaryingparameter (TVP) model is proposed for the monetary growth function. Based on Kalman filtering estimation of recursive forcast errors and their conditional variances, the Lucas hypothesis is tested for the U.S. economy (1964.1  1985.4) using monetary growth as an aggregate demand variable. The Lucas hypothesis is rejected in favor of Friedman's (1977) hypothesis: the conditional variance of monetary growth affects real output directly, not through the coefficients on the forcast error term in the Lucastype output equation
7 editions published in 1988 in English and held by 58 WorldCat member libraries worldwide
The main econometric issue in testing the Lucas hypothesis (1973) in a times series context is the estimation of the variance conditional on past information. The ARCH model, proposed by Engle (1982), is one way of specifying the conditional variance. But the assumption underlying the ARCH specification is adhoc. The existence of ARCH can sometimes be interpreted as evidence of misspecification. Under the assumption that a monetary policy regime is continuously changing, a timevaryingparameter (TVP) model is proposed for the monetary growth function. Based on Kalman filtering estimation of recursive forcast errors and their conditional variances, the Lucas hypothesis is tested for the U.S. economy (1964.1  1985.4) using monetary growth as an aggregate demand variable. The Lucas hypothesis is rejected in favor of Friedman's (1977) hypothesis: the conditional variance of monetary growth affects real output directly, not through the coefficients on the forcast error term in the Lucastype output equation
Implicit estimates of natural trend, and cyclical components of real GNP by
Charles R Nelson(
)
6 editions published in 1987 in English and held by 58 WorldCat member libraries worldwide
Estimates of the natural or full employment level of real GNP have usually been obtained by statistical detrending procedures which assume independence between trend and cycle. This paper presents an alternative approach which says that the natural level should be measured in the context of a macro model. If the quantity equation holds with money exogenous and if the price level is sticky, then observed real GNB will reflect both nominal shocks, which are observed, and real shocks, which are unobserved shifts in the natural level. The path of the natural level is then implicit in the data given the model. Calculated paths of the natural level of U.S. real GNP and the resulting business cycle are presented
6 editions published in 1987 in English and held by 58 WorldCat member libraries worldwide
Estimates of the natural or full employment level of real GNP have usually been obtained by statistical detrending procedures which assume independence between trend and cycle. This paper presents an alternative approach which says that the natural level should be measured in the context of a macro model. If the quantity equation holds with money exogenous and if the price level is sticky, then observed real GNB will reflect both nominal shocks, which are observed, and real shocks, which are unobserved shifts in the natural level. The path of the natural level is then implicit in the data given the model. Calculated paths of the natural level of U.S. real GNP and the resulting business cycle are presented
Mean reversion in stock prices? : a reappraisal of the empirical evidence by
MyungJig Kim(
)
8 editions published between 1988 and 1991 in English and held by 57 WorldCat member libraries worldwide
Recent research based on variance ratios and multiperiodreturn autocorrelations concludes that the stock market exhibits mean reversion in the sense that a return in excess of the average tends to be followed by partially offsetting returns in the opposite direction. Dividing history into pre1926, 192646, and post1946 subperiods, we find that the meanreversion phenomenon is a feature of the 192646 period, but not of the post1946 period which instead exhibits persistence of returns. Evidence for pre1926 data is mixed. The statistical significance of test statistics is assessed by estimating their distribution using stratified randomization. Autocorrelations of multiperiod returns imply a forecast of future returns, which is presented for postwar threeyear returns using 192646, full sample, and sequentially updated coefficient estimates. The correlation between actual and forecasted returns is negative in each case. We conclude that evidence of mean reversion in U.S. stock returns is substantially weaker than reported in the recent literature. If meanreversion continues to be a feature of the stock market, then the experience of the past forty years has been an aberration
8 editions published between 1988 and 1991 in English and held by 57 WorldCat member libraries worldwide
Recent research based on variance ratios and multiperiodreturn autocorrelations concludes that the stock market exhibits mean reversion in the sense that a return in excess of the average tends to be followed by partially offsetting returns in the opposite direction. Dividing history into pre1926, 192646, and post1946 subperiods, we find that the meanreversion phenomenon is a feature of the 192646 period, but not of the post1946 period which instead exhibits persistence of returns. Evidence for pre1926 data is mixed. The statistical significance of test statistics is assessed by estimating their distribution using stratified randomization. Autocorrelations of multiperiod returns imply a forecast of future returns, which is presented for postwar threeyear returns using 192646, full sample, and sequentially updated coefficient estimates. The correlation between actual and forecasted returns is negative in each case. We conclude that evidence of mean reversion in U.S. stock returns is substantially weaker than reported in the recent literature. If meanreversion continues to be a feature of the stock market, then the experience of the past forty years has been an aberration
Spurious trend and cycle in the state space decomposition of a time series with a unit root by
Charles R Nelson(
)
7 editions published in 1987 in English and held by 57 WorldCat member libraries worldwide
Recent research has proposed the state space (88) framework for decomposition of GNP and other economic time series into trend and cycle components, using the Kalman filter. This paper reviews the empirical evidence and suggests that the resulting decomposition may be spurious, just as detrending by linear regression is known to generate spurious trends and cycles in nonstationary time series. A Monte Carlo experiment confirms that when data is generated by a random walk, the 88 model tends to indicate (incorrectly) that the series consists of cyclical variations around a smooth trend. The improvement in fit over the true model will typically appear to be statistically significant. These results suggest that caution should be exercised in drawing inferences about the nature of economic processes from the 88 decomposition
7 editions published in 1987 in English and held by 57 WorldCat member libraries worldwide
Recent research has proposed the state space (88) framework for decomposition of GNP and other economic time series into trend and cycle components, using the Kalman filter. This paper reviews the empirical evidence and suggests that the resulting decomposition may be spurious, just as detrending by linear regression is known to generate spurious trends and cycles in nonstationary time series. A Monte Carlo experiment confirms that when data is generated by a random walk, the 88 model tends to indicate (incorrectly) that the series consists of cyclical variations around a smooth trend. The improvement in fit over the true model will typically appear to be statistically significant. These results suggest that caution should be exercised in drawing inferences about the nature of economic processes from the 88 decomposition
The distribution of the instrumental variables estimator and its tratio when the instrument is a poor one by
Charles R Nelson(
)
7 editions published in 1988 in English and held by 56 WorldCat member libraries worldwide
When the instrumental variable is a poor one, in the sense of being weakly correlated with the variable it proxies, the small sample distribution of the IV estimator is concentrated around a value that is inversely related to the feedback in the system and which is often further from the true value than is the plim of OLS. The sample variance of residuals similarly becomes concentrated around a value which reflects feedback and not the variance of the disturbance. The distribution of the tratio reflects both of these effects, stronger feedback producing larger tratios. Thus, in situations where OLS is badly biased, a poor instrument will lead to spurious inferences under IV estimation with high probability, and generally perform worse than OLS
7 editions published in 1988 in English and held by 56 WorldCat member libraries worldwide
When the instrumental variable is a poor one, in the sense of being weakly correlated with the variable it proxies, the small sample distribution of the IV estimator is concentrated around a value that is inversely related to the feedback in the system and which is often further from the true value than is the plim of OLS. The sample variance of residuals similarly becomes concentrated around a value which reflects feedback and not the variance of the disturbance. The distribution of the tratio reflects both of these effects, stronger feedback producing larger tratios. Thus, in situations where OLS is badly biased, a poor instrument will lead to spurious inferences under IV estimation with high probability, and generally perform worse than OLS
Longterm behavior of yield curves by
Andrew F Siegel(
)
9 editions published in 1986 in English and held by 52 WorldCat member libraries worldwide
The flattening of yield curves at longterm maturities is proven to be approximately proportional to the reciprocal of the time to maturity under general conditions. This is a consequence of the persistence of earlier forward rates in the averaging process which produces yields from forward rates. This relationship suggests the use of a"reciprocal maturity yield curve" which significantly facilitates the interpretation of the behavior of longterm yields by linearizing them for display over a shorter interval. This is illustrated using a yield curve for U.S. Treasury bills
9 editions published in 1986 in English and held by 52 WorldCat member libraries worldwide
The flattening of yield curves at longterm maturities is proven to be approximately proportional to the reciprocal of the time to maturity under general conditions. This is a consequence of the persistence of earlier forward rates in the averaging process which produces yields from forward rates. This relationship suggests the use of a"reciprocal maturity yield curve" which significantly facilitates the interpretation of the behavior of longterm yields by linearizing them for display over a shorter interval. This is illustrated using a yield curve for U.S. Treasury bills
Pitfalls in the use of time as an explanatory variable in regression by
Charles R Nelson(
)
7 editions published between 1983 and 1984 in English and held by 47 WorldCat member libraries worldwide
Regression of a trendless random walk on time produces Rsquared values around .44 regardless of sample length. The residuals from the regression exhibit only about 14 percent as much variation as the original series even though the underlying process has no functional dependence on time. The autocorrelation structure of these "detrended" random walks is pseudocyclical and purely artifactual. Conventional tests for trend are strongly biased towards finding a trend when none is present, and this effect is only partially mitigated by CochraneOrcutt correction for autocorrelation. The results are extended to show that pairs of detrended random walks exhibit spurious correlation
7 editions published between 1983 and 1984 in English and held by 47 WorldCat member libraries worldwide
Regression of a trendless random walk on time produces Rsquared values around .44 regardless of sample length. The residuals from the regression exhibit only about 14 percent as much variation as the original series even though the underlying process has no functional dependence on time. The autocorrelation structure of these "detrended" random walks is pseudocyclical and purely artifactual. Conventional tests for trend are strongly biased towards finding a trend when none is present, and this effect is only partially mitigated by CochraneOrcutt correction for autocorrelation. The results are extended to show that pairs of detrended random walks exhibit spurious correlation
A reappraisal of recent tests of the permanent income hypothesis by
Charles R Nelson(
)
7 editions published between 1985 and 1987 in English and held by 47 WorldCat member libraries worldwide
Hall (1978) showed that the permanent income hypothesis implies that consumption (1) follows a random walk, and (2) cannot be predicted by past income. Reexamination of Hall's data results in rejection of the random walk hypothesis in favor of the alternative hypothesis of positively autocorrelated changes. Evidently this is due to Hall's choice of a quadratic utility function. A logrithmic utility function implies a random walk in the log of consumption which is supported by the data. Hall reported that past income had a negative but insignificant relation to consumption. Changes in the log of income, however, do have a positive predictive relation to changes in the log of consumption. The adjustment of consumption to income seems to be spread over two quarters. Flavin's (1981) test of the theory is formally equivalent to Hall's except for assuming stationarity around a time trend. Mankiw and Shapiro (1984) have pointed out that the effect of detrending may be to tend to rejection of the theory when it is in fact correct. For Hall's data the effect of detrending is to reverse the sign of the coefficient on past income. Its magnitude is what the MankiwShapiro analysis predicts under the permanent income hypothesis
7 editions published between 1985 and 1987 in English and held by 47 WorldCat member libraries worldwide
Hall (1978) showed that the permanent income hypothesis implies that consumption (1) follows a random walk, and (2) cannot be predicted by past income. Reexamination of Hall's data results in rejection of the random walk hypothesis in favor of the alternative hypothesis of positively autocorrelated changes. Evidently this is due to Hall's choice of a quadratic utility function. A logrithmic utility function implies a random walk in the log of consumption which is supported by the data. Hall reported that past income had a negative but insignificant relation to consumption. Changes in the log of income, however, do have a positive predictive relation to changes in the log of consumption. The adjustment of consumption to income seems to be spread over two quarters. Flavin's (1981) test of the theory is formally equivalent to Hall's except for assuming stationarity around a time trend. Mankiw and Shapiro (1984) have pointed out that the effect of detrending may be to tend to rejection of the theory when it is in fact correct. For Hall's data the effect of detrending is to reverse the sign of the coefficient on past income. Its magnitude is what the MankiwShapiro analysis predicts under the permanent income hypothesis
Parsimonious modeling of yield curves for U.S. Treasury bills by
Charles R Nelson(
)
7 editions published between 1985 and 1988 in English and held by 44 WorldCat member libraries worldwide
A new model is proposed for representinq the term to maturity structure of interest rates at a point in time. The model produces humped, monotonic and Sshaped yield curves using four parameters. Conditional on a time decay parameter, estimates of the other three are obtained by least squares. Yield curves for thirtyseven sets of U.S. Treasury bill yields with maturities up to one year are presented. The median standard deviation of fit is just over seven basis points and the corresponding median Rsquared is .96. Study of residuals suggests the existence of specific maturity effects not previously identified. Using the models to predict the price of a long term bond provides a diagnostic check and suggests directions for further research
7 editions published between 1985 and 1988 in English and held by 44 WorldCat member libraries worldwide
A new model is proposed for representinq the term to maturity structure of interest rates at a point in time. The model produces humped, monotonic and Sshaped yield curves using four parameters. Conditional on a time decay parameter, estimates of the other three are obtained by least squares. Yield curves for thirtyseven sets of U.S. Treasury bill yields with maturities up to one year are presented. The median standard deviation of fit is just over seven basis points and the corresponding median Rsquared is .96. Study of residuals suggests the existence of specific maturity effects not previously identified. Using the models to predict the price of a long term bond provides a diagnostic check and suggests directions for further research
Markov regimeswitching and unit root tests by
Charles R Nelson(
)
8 editions published between 2000 and 2001 in English and held by 25 WorldCat member libraries worldwide
"We investigate the power and size performance of unit root tests when the true data generating process undergoes Markov regimeswitching. All tests, including those robust to a single break in trend growth rate, have very low power against a process with a Markovswitching trend growth rate as in Lam (1990). However, for the case of business cycle nonlinearities, unit root tests are very powerful against models used as alternatives to Lam (1990) that specify regimeswitching in the transitory component of output. Under the null hypothesis, the received literature documents size distortions in DickeyFuller type tests caused by a single break in trend growth rate or variance. We find these results do not generalize to most parameterizations of Markovswitching in trend or variance. However, Markovswitching in variance can lead to overrejection in tests robust to a single break in the level of trend."
8 editions published between 2000 and 2001 in English and held by 25 WorldCat member libraries worldwide
"We investigate the power and size performance of unit root tests when the true data generating process undergoes Markov regimeswitching. All tests, including those robust to a single break in trend growth rate, have very low power against a process with a Markovswitching trend growth rate as in Lam (1990). However, for the case of business cycle nonlinearities, unit root tests are very powerful against models used as alternatives to Lam (1990) that specify regimeswitching in the transitory component of output. Under the null hypothesis, the received literature documents size distortions in DickeyFuller type tests caused by a single break in trend growth rate or variance. We find these results do not generalize to most parameterizations of Markovswitching in trend or variance. However, Markovswitching in variance can lead to overrejection in tests robust to a single break in the level of trend."
The less volatile U.S. economy : a Bayesian investigation of timing, breadth, and potential explanations by
ChangJin Kim(
Book
)
8 editions published in 2001 in English and held by 23 WorldCat member libraries worldwide
8 editions published in 2001 in English and held by 23 WorldCat member libraries worldwide
Ying yong shi jian shu lie fen xi : guan li yu ce by
Charles R Nelson(
Book
)
2 editions published in 1984 in Chinese and held by 8 WorldCat member libraries worldwide
2 editions published in 1984 in Chinese and held by 8 WorldCat member libraries worldwide
Spurious periodicity in inappropriately detrended time series by
Charles R Nelson(
Book
)
4 editions published between 1979 and 1980 in English and held by 6 WorldCat member libraries worldwide
4 editions published between 1979 and 1980 in English and held by 6 WorldCat member libraries worldwide
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Business cycles Business cyclesEconometric models Business forecasting Consumption (Economics) Econometric models Econometrics Economic history Economic indicators Economics EconomicsMathematical models Employment (Economic theory) Gross national product Heteroscedasticity Income Inflation (Finance) Instrumental variables (Statistics) InterestMathematical models Interest rates Interest ratesMathematical models Investments Labor supply Liquidity (Economics) Market surveysMathematical models Markov processes Monetary policy Occupational mobility Rate of returnForecastingEconometric models Regression analysis RiskMathematical models Sampling (Statistics) Statespace methods Stock exchanges Stock price forecastingMathematical models StocksPrices Timeseries analysis Timeseries analysisEconometric models Treasury billsMathematical models United States