Determinants of food consumption in rural Sierra Leone: Application of the quadratic expenditure system to the consumption-leisure component of a household-firm model

This paper reports the application of a quadratic expenditure system with demographic variables to the household consumption-leisure choice component of a household-firm model. A system of seven commodities is estimated: including five foods, non-food and leisure. Appropriate for such a level of disaggregation a demand system is used, the Quadratic Expenditure System, which allows for a flexible relationship between full income and commodity expenditures without sacrificing parsimony in parameters. Demographic data on households are explicitly incorporated into the model allowing for a richer specification than can be achieved by using per capita variables. The data are from a cross-section survey of households in rural Sierra Leone. Price variation exists by region, permitting estimation of a complete demand system. Engel curves are found to be significantly non-linear, with marginal expenditure on rice, the major staple, declining with higher income. Most foods are found to be reasonably price responsive with sizeable own price substitution effects, declining with higher income. Aggregate labor supply is found to be price inelastic.     

Optimal stock trading with personal taxes: Implications for prices and the abnormal January returns

The tax law confers upon the investor a timing option - to realize capital losses and defer capital gains. With the tax rate on long term gains and losses being about half the short term rate, the law provides a second timing option - to realize losses short term and gains long term, if at all. Our theory and simulation over the 1962–1977 period establish that taxable investors should realize long term gains in high variance stocks and repurchase stock in order to realize potential future losses short term. Tax trading does not explain the small-firm anomaly but predicts a seasonal pattern in trading volume which maps into a seasonal pattern in stock prices, the January anomaly, only if investors are irrational or ignorant of the price seasonality.     

BOND PORTFOLIO IMMUNIZATION: TESTS OF MATURITY, ONE- AND TWO-FACTOR DURATION MATCHING STRATEGIES

This paper provides additional evidence on the usefulness of duration as a strategy tool by developing a two-factor duration model and by using a reasonably reliable database to compare empirically the relative performance of maturity, one-factor duration, and two-factor duration matching strategies in immunizing portfolios of default-free and option-free bonds against interest rate risk. The results suggest that, on average, duration models, even for arbitrarily assumed simple stochastic processes, are more accurate than maturity models and that increased accuracy may be achieved by increasing the length of the planning period and the number of factors in the model.     

On the convolution of logistic random variables

An expression is obtained for the distribution of a convolution of independent and identically distributed logistic random variables by directly inverting the characteristic function. This distribution is shown to be closely approximated by a student'st distribution when both distribution are standardized. Moreover, by showing that some of the analytic simplicity and statistical properties that are manifest in the single logistic also obtain in the convolution, an application of the convolution as a dose-response curve in the bio-assay problem is suggested.     

Financial forecasts in the presence of asymmetric loss aversion, skewness and excess kurtosis

We present closed-form results for the out-of-sample forecasts under the joint presence of asymmetric loss and non-normality, extending the results of Granger [1969. Operations Research Quarterly 20, 199–207; 1999. Spanish Economic Review 1, 161–173] and Christoffersen and Diebold [1997. Econometric Theory 13, 808–817]. We consider the LinEx and Double LinEx loss functions and non-normal distributions in the form of the Gram–Charlier class. We show how the preference asymmetries interact with the distribution asymmetries to determine optimal forecasts which contain the optimal predictors under symmetry and normality as special cases. We also examine the implications of our results for the development of forecast rationality tests, extending the work of Batchelor and Peel [1998. Economics Letters 61, 49–54]. Our results are relevant for the design of efficient investment and risk management policies.