Before revision: Many key variablesin finance, economics and risk management, including financial returns and foreign exchange rates , exhibit nonlinear dependence, heterogeneity and heavy-tailedness of some usually largely unknown type. The presence of non-linear dependence (usually modelled using GARCH-type dynamics) and heavy-tailedness may make problematic the analysis of (non-)efficiency , volatility clustering and predictive regressions in economic and financial markets using traditional approaches that appeal to asymptotic normality of sample autocorrelation functions (ACFs) of returns and their squares.
After revision: Many key variablesin finance, economics and risk management, including financial returns and foreign exchange rates , exhibit nonlinear dependence, heterogeneity and heavy-tailedness . These properties may make problematic the analysis of (non-)efficiency , volatility clustering and predictive regressions in economic and financial markets using traditional approaches that appeal to asymptotic normality of sample autocorrelation functions (ACFs) of returns and their squares.