Predictability of stock markets with disequilibrium trading. A commentary paper

The paper focuses on the problem of predictability of stock market returns with disequilibrium trading. It is shown that the predictability of returns may be the consequence of quantity constraints appearing in the markets due to the imposition of administrative restrictions on trade. A relevant test of predictability for the Warsaw Stock Exchange (WSE) based on information referring to disequilibrium states occurrence is proposed. The empirical results of its application to the WSE on a sample containing session-to-session observations from the period January 1995 to December 1999 strongly support the hypothesis of predictability.     

The assessment of significance of benefits gained from the improvement of quality management systems in Polish organizations

The implementation and improvement of quality management systems conducted according to ISO 9001:2008 standards should bring benefits to any organization. On the basis of research conducted in 753 Polish companies, this publication presents results of analysis concerning the assessment of importance of benefits being a consequence of quality management system. The studies concerning the significance of benefits being a consequence of quality management systems in Polish companies allow claiming that financial benefits and markets ones are the most important for the management team whereas the organizational benefits are of less importance. It leads to neglecting ‘soft’ factors of quality management which are significant in TQM concept and drawing to much attention to so called hard factors- especially financial ones.     

Model simplification and variable selection: A replication of the UK inflation model by Hendry (2001)

In this paper, we revisit the well-known UK inflation model by Hendry (Journal of Applied Econometrics, 2001, 16, 255–275. We replicate the results in a narrow sense using the gretl and PcGive programs. In a wide sense, we extend the study of model uncertainty using the Bayesian averaging of classical estimates (BACE) approach as an automatic model reduction strategy. We consider three different specifications to compare BACE variable selection with Hendry's reduction. We find that the BACE method can recover the path of nontrivial reduction strategy.     

The interplay between labor market rigidity and volatility-growth nexus

Using a simple innovation‐driven growth model I investigate to what extent labor market regulations underlie the devastating effects of output volatility on long‐run growth trends. Empirical analysis conducted for 154 countries over the 1996–2005 period shows that an increase from low values of the rigidity of employment index strengthens the influence of volatility on growth. This effect weakens with further increases in rigidity. Hence implementation of labor protection legislation is recommended in economies frequently hit by shocks.     

Returns from income strategies in rural Poland

In order to stabilize and improve their income situation, rural households are strongly encouraged to diversify their activities both in and outside the agricultural sector. Often, however, this phenomenon takes on only moderate proportions. This article addresses issues of rural households' income diversification in the case of Poland. It investigates returns from rural households' income strategies using propensity score matching methods and extensive datasets spanning 1998–2008. Results suggest that returns from combining farm and off‐farm activities were lower than returns from concentrating on farming or on self‐employment outside agriculture. This differential is stable over time although returns from diversification have relatively improved after the accession of Poland to the European Union. This is also visible in the fact that since 2006, returns from combining farm and off‐farm activities have equalized with returns from relying solely on hired off‐farm labour, thus smoothing away the difference observed before the accession. Further, over the analysed period, households pursuing a diversification strategy performed better than those relying solely on unearned income. Finally, in general, incomes in households combining farm and off‐farm activities were higher than in those combining off‐farm income sources.     

A risk-driven approach to exchange rate modelling

The paper presents a new approach to exchange rate modelling that augments the CHEER model with a sovereign credit default risk as perceived by financial investors making their decisions. In the cointegrated VAR system with nine variables comprised of the short- and long-term interest rates in Poland and the euro area, inflation rates, CDS indices and the zloty/euro exchange rate, four long-run relationships were found. Two of them link term spreads with inflation rates, the third one describes the exchange rate and the fourth one explains the inflation rate in Poland. Transmission of shocks was analysed by common stochastic trends. The estimation results were used to calculate the zloty/euro equilibrium exchange rate.     

A Bayesian method of combining judgmental and model-based density forecasts

This paper introduces a formal method of combining expert and model density forecasts when the sample of past forecasts is unavailable. It works directly with the expert forecast density and endogenously delivers weights for forecast combination, relying on probability rules only. The empirical part of the paper illustrates how the framework can be applied in forecasting US inflation by mixing density forecasts from an autoregressive model and the Survey of Professional Forecasters.     

Top-<Emphasis Type="Italic">k</Emphasis>-lists

Top-k-lists are introduced as sequences of k-dimensional random vectors with ordered components being k largest observations from a sequence of independent identically distributed random variables. Such lists changing in time are natural stochastic models of ranking tables which appear in many situations in real life, when one wants to keep a track of several best results in a given field. Here we study basic properties of top-k-lists as joint distributions, conditional structures, representations, driving examples of top-k-lists from exponential and uniform distributions, asymptotics and a relation to generalized order statistics.     

Monitoring the cross-covariances of a multivariate time series

In this paper sequential procedures are proposed for jointly monitoring all elements of the covariance matrix at lag 0 of a multivariate time series. All control charts are based on exponential smoothing. As a measure of the distance between the target values and the actual values the Mahalanobis distance is used. It is distinguished between residual control schemes and modified control schemes. Several properties of these charts are proved assuming the target process to be a stationary Gaussian process. Within an extensive Monte Carlo study all procedures are compared with each other. As a measure of the performance of a control chart the average run length is used. An empirical example about Eastern European stock markets illustrates how the autocovariance and the cross-covariance structure of financial assets can be monitored by these methods.