A Comparison of the Power of Parametric and Nonparametric Tests of Location Shift for Event Studies

This paper distinguishes between testing approach (parametric t, sign, cross-sectional rank, and longitudinal rank) and test type (conventional, standardized, and weighted least squares). Similar tests (i.e., tests of the same type) are compared for each testing approach using constant and unequal shift models. Thus the results given here are free of confounding effects present in prior comparisons of dissimilar tests. While all the tests compared are sensitive to the underlying location shift model, if the shift is independent of the security standard deviation, then the weighted least squares longitudinal rank test is most. powerful.     

Architecture Billings as a Leading Indicator of Construction

Due to the size and cyclicality of construction, a premium is placed on accurately predicting nonresidential construction trends, particularly at turning points in the construction cycle. Given that construction decisions are made by hundreds of thousands of businesses, nonprofit institutions, and government organizations, it is extremely difficult to get comprehensive information on building plans. However, since architects design the overwhelming majority of nonresidential construction projects, gathering information on billings at architecture firms provides leading information on future construction trends. Statistical analysis demonstrates that information provided by architecture firms on trends in their billings is highly correlated with the eventual nonresidential construction activity, with leads of up to one year. JEL Classification C430, L700     

The role of scanning in open intelligence systems

Every month, SRI Consulting Business Intelligence (SRIC-BI) professionals assemble more than 100 short abstracts of developments that they perceive to be signals of change, discontinuities, inflection points, outliers, or disruptive developments. The effort is part of a continuous scanning process and Scan program that allows SRIC-BI to gauge the ongoing turbulent confluence of culture, commerce, and technology that defines today's business environment. For more than 25 years, scanning has played an essential role in SRIC-BI's and SRI International's foresight capabilities by providing a systematic means for surveying the broad external environment for change vectors. Traditional monitoring processes in most organizations are largely arbitrary, depending on what concerned individuals or leaders in the organization are reading, thinking about, and sharing informally with each other. But in today's world, arbitrary is insufficient. No foresight function can operate with confidence without a disciplined process for spotting new patterns of change and bringing those issues into the organization for early consideration and action. This article describes the scanning process as SRIC-BI practices it, the importance of open intelligence systems, what benefits the scanning process can provide to organizations, and what problems organizations typically run into when setting up scanning systems.     

Using Multiperiod Variables in the Analysis of Home Improvement Decisions by Homeowners

Though approaching $200 billion a year, spending by homeowners and rental property owners on improvements and repairs to the stock of existing housing units has received little attention in the academic literature. Historically, studies of the determinants of home improvements have focused heavily on the static characteristics of the housing unit (age, value, size, location) and of the occupants (age, income, household composition). This article extends this inquiry by incorporating dynamic factors, namely changes in the composition of the household and previous spending on home improvements. The results of these enhancements are encouraging. Additions of household members and having recently undertaken a major home improvement project are significantly related to home expansion projects.     

College Quality and Wages in the United States

Abstract. We estimate the effects of the quality of the college a student attends on their later earnings using data from a cohort of US college students from the late 1970s and early 1980s. We rely on a linear selection on observables identification strategy, which is justified in our context by a very rich set of conditioning variables. We find economically important earnings effects of college quality for men and women, as well as effects on educational attainment, spousal earnings and other demographic variables. These effects remain roughly constant over time and result primarily from effects on wages, rather than from effects on hours or labor force participation. We find that, over the lower part of the range of college quality, increases in college quality (which entail higher expenditures per student) pass a simple social cost–benefit test.     

The Impact of Standard Setting on Relevance and Reliability of Accounting Information: Lower of Cost or Market Accounting Reforms in China

During the period from 1998 to 2000, China implemented several new asset write‐down regulations that mandate lower of cost or market accounting (LCM) for most non‐cash assets. This is a study of the relevance and reliability of those regulations for investors in China. The study measures the association of net asset value with market value of equity and the association of accounting income with stock return, on both a historical cost accounting (HCA) basis and on an LCM basis. A fixed‐effects model controlling both year and firm effects is used in a balanced panel sample. The panel regressions show high levels of explanatory power. LCM values can be relevant but may be measured with sufficient error that they do not improve the prediction of firm values. Reliability is measured using non‐nested, overlapping model comparison tests (J and Cox). The paper also considers whether discretionary motivations influence the amount of write‐down. The study supports the relevance of LCM reforms, but finds that reliability is not increased over HCA during the period under study. Reliability appears to be reduced by the voluntary nature of LCM provisions during part of the period and by the effects of opportunism for some firms in the sample.