Spurious regressions in technical trading

This paper investigates the spurious effect in forecasting asset returns when signals from technical trading rules are used as predictors. Against economic intuition, the simulation result shows that, even if past information has no predictive power, buy or sell signals based on the difference between the short-period and long-period moving averages of past asset prices can be statistically significant when the forecast horizon is relatively long. The theoretical analysis reveals that both ‘momentum’ and ‘contrarian’ strategies can be falsely supported, while the probability of obtaining each result depends on the type of the test statistics employed.     

Perfect foresight dynamics in binary supermodular games

The present paper considers equilibrium selection in binary supermodular games based on perfect foresight dynamics. We provide complete characterizations of absorbing and globally accessible equilibria and apply them to two subclasses of games. First, for unanimity games, it is shown that our selection criterion is not in agreement with that in terms of Nash products, and an example is presented in which two strict Nash equilibria are simultaneously globally accessible when the friction is sufficiently small. Second, a class of games with invariant diagonal are proposed and shown to generically admit an absorbing and globally accessible equilibrium for small frictions.     

Effects of direct payments on rice income variability in Japan*

The effects of direct payments on rice income variability in Japan are analysed based on a balanced panel dataset of Japanese rice farms for 2012–2016. Firstly, the contribution of income components to rice income variability and the effects of a direct payment reduction are discussed by applying variance decomposition. Secondly, robust regression techniques are used to measure the correlation between direct payments and rice income variability. The originality of this paper is that it disaggregates the effects of payments using a regression analysis of the effects of direct payments on income variability for Japan. This contrasts with the existing literature on this topic, which has largely focused on European Union countries. This paper discusses to what degree the reduction in direct payments increases income variability. The results reveal that direct payments decrease Japanese rice income variability. Indeed, after controlling for various farm characteristics, we find a negative relationship between the amount of direct payments linked to rice production and rice income variability. Finally, the results suggest that reducing direct payments when the rice price is falling would increase rice income variability.