Efficient modelling and forecasting with range based volatility models and its application

This paper considers an alternative method for fitting CARR models using the combined estimating functions (CEF) by showing its usefulness in applications in economics and quantitative finance. The associated information matrix for corresponding new estimates is derived to calculate the standard errors. Extensive simulation study is carried out to demonstrate its superiority relative to two other competitors: the linear estimating functions (LEF) and the maximum likelihood (ML). Results show that the CEF method is more efficient than the LEF and ML methods when the error distribution is mis-specified. Applying a real data set from financial market, we illustrate the applicability of the CEF method in practice and report some reliable forecast values for minimizing the risk in decision making process.     

An empirical comparison of the Tucker-Messick and INDSCAL models: Measuring viewpoints about transit attributes

This investigation sought (1) to identify perceptually homogenous respondent groups by two individual differences scaling models initially proposed by Tucker and Messick, and Carroll and Chang, (2) to reveal the significance of group percepts with respect to anticipated satisfactions and socio-economic and activity pattern characteristics of group members, and (3) to test empirically the significance of formal distinctions between the two individual differences models. The study utilized judgments about 12 transit attributes of three innovative urban, public transportation modes from a sample of 243 respondents. It was possible to specify seven perceptually homogenous groups, which were distinct in terms of a qualitative analysis of their perceptual spaces and a quantitative convergent-discriminant validity analysis predicated on the distances between pairs of attributes in their spaces. The perceptual groups were shown to have interpretable links to socio-economic and activity pattern characteristics of the respondents. In addition, it was possible to statistically account for the satisfaction ratings of the respondents by the dimensions of their corresponding spaces. Since the Tucker-Messick model was shown to derive more distinct spaces for the separate groups than the INDSCAL model of Carroll and Chang, the Tucker-Messick spaces more uniquely tied a group's percepts to its corresponding satisfactions.     

Mixture models of choice under risk

This paper is concerned with estimating preference functionals for choice under risk from the choice behaviour of individuals. We note that there is heterogeneity in behaviour between individuals and within individuals. By ‘heterogeneity between individuals’ we mean that people are different, in terms of both their preference functionals and their parameters for these functionals. By ‘heterogeneity within individuals’ we mean that the behaviour may be different even by the same individual for the same choice problem. We propose methods of taking into account all forms of heterogeneity, concentrating particularly on using a Mixture Model to capture the heterogeneity of preference functionals.     

Eliciting preferences and the construction of indifference maps: A comparative empirical evaluation of two measurement methodologies

The paper reports results of experiments conducted to evaluate the following methods of preference measurement: (a) the method of eliciting certainty equivalents to gambles, for obtaining a von Neumann Morgenstern utility function; and (b) the dominance method for obtaining indifference maps. The following attributes were used for method comparison: (1) test-retest consistency; (2) linearity of trade-offs; (3) confidence in the method; (4) ease of judgment required by method; and (5) goodness of method predictions. The study also investigated the associations between method reliability and several behavioural and experimental factors such as subjects' acceptance of rationality axioms, propensities of subjects for judicial modes of evaluation, perceived realism of scenarios and subjects' discrimination bands for probabilities.     

Visual Attention and Attribute Attendance in Multi‐Attribute Choice Experiments

Decision strategies in multi‐attribute choice experiments are investigated using eye‐tracking. The visual attention towards, and attendance of, attributes is examined. Stated attendance is found to diverge substantively from visual attendance of attributes. However, stated and visual attendance are shown to be informative, non‐overlapping sources of information about respondent utility functions when incorporated into model estimation. Eye‐tracking also reveals systematic nonattendance of attributes only by a minority of respondents. Most respondents visually attend most attributes most of the time. We find no compelling evidence that the level of attention is related to respondent certainty, or that higher or lower value attributes receive more or less attention. Copyright © 2014 John Wiley & Sons, Ltd.     

A Luenberger soil-quality indicator

This paper discusses how a quality indicator can be constructed as a Luenberger indicator using directional distance functions. This leads to a suggested formula for aggregating individual soil quality attributes into an indicator. The method is illustrated using crop trials data from Western Australia. The approach presented is theoretically consistent and may provide a better alternative to many of the ad hoc procedures used to construct soil-quality indexes in the soil science literature. Our approach also addresses shortcomings related to quality indicators previously proposed in the productivity literature using Malmquist indices.     

Bayesian Estimation of Willingness‐to‐pay Where Respondents Mis‐report Their Preferences*

We introduce a modified conditional logit model that takes account of uncertainty associated with mis‐reporting in revealed preference experiments estimating willingness‐to‐pay (WTP). Like Hausman et al. [Journal of Econometrics (1988) Vol. 87, pp. 239–269], our model captures the extent and direction of uncertainty by respondents. Using a Bayesian methodology, we apply our model to a choice modelling (CM) data set examining UK consumer preferences for non‐pesticide food. We compare the results of our model with the Hausman model. WTP estimates are produced for different groups of consumers and we find that modified estimates of WTP, that take account of mis‐reporting, are substantially revised downwards. We find a significant proportion of respondents mis‐reporting in favour of the non‐pesticide option. Finally, with this data set, Bayes factors suggest that our model is preferred to the Hausman model.     

Employee preference for performance-related pay: predictors and consequences for organizational citizenship behaviour in a Japanese firm

Research on performance-related pay (PRP) has largely focused on the outcomes of PRP implementation in a Western context. This paper examines the predictors of employee preference for PRP and the consequences for organizational citizenship behaviour (OCB) in Japan where seniority-based pay and teamwork have long been the norm. The sample consists of 155 sales representatives in a large electric appliance manufacturing company that was transitioning from a seniority-based to a PRP-based compensation system. Overall, respondents indicated a preference for PRP over seniority-based pay. The hierarchical regression results indicate that employee preference for PRP is positively and significantly associated with individual competitiveness and occupational commitment, while being negatively and significantly related to organizational commitment and to the age group of employees who joined the labour market prior to the bursting of the economic bubble in Japan. No significant relationship was observed between PRP preference and OCB in the hierarchical regression analysis, although the two are positively and significantly correlated contrary to our expectations. Implications for international human resource management are discussed.     

On Some Statistical Methods for Modelling the Incidence of Poverty

This paper analyzes a common method of estimating the pattern of individual characteristics associated with poverty – the logit/probit technique applied to a dummy variable identifying those individuals who are below a poverty line. We show that this procedure is seriously flawed by a fundamental logical difficulty and further statistical complications when the poverty line is estimated or when generalized poverty measures are used. An alternative approach is proposed, based on a semi-parametric series expansion appproximation to the conditional income distribution. Estimation, testing and summary procedures are established and applied to Hungarian survey data.     

A quasi-maximum likelihood method for estimating the parameters of multivariate diffusions

A quasi-maximum likelihood procedure for estimating the parameters of multi-dimensional diffusions is developed in which the transitional density is a multivariate Gaussian density with first and second moments approximating the true moments of the unknown density. For affine drift and diffusion functions, the moments are exactly those of the true transitional density and for nonlinear drift and diffusion functions the approximation is extremely good and is as effective as alternative methods based on likelihood approximations. The estimation procedure generalises to models with latent factors. A conditioning procedure is developed that allows parameter estimation in the absence of proxies.     

The impact of alternative transportation systems on urban structure

This paper extends a recent von Thünen-type model of urban structure by Mills to include two competing forms of transportation, and then compares simulated representative American and European cities with respect to size, density, and land rents. Assuming consumers minimize costs in choosing between competing travel modes, the 19-equation model demonstrates that land rent differentials are diminished by adding an alternative travel mode, and that transport capacity is far more important than fare structures in determining transit patterns and land use. American urban structure appears to resemble European urban patterns as transportation modes proliferate.     

Coincidence of Agreement between Probabilistic and Algebraic Choosers

Algebraic choosers make precise responses to pairwise preference comparisons on alternatives that are based on the relative rankings of the alternatives over some set of n attributes of comparison. Probabilistic choosers are less precise than algebraic choosers are, and they give pairwise preference responses that have some probability of being in agreement with the response of an algebraic chooser. The magnitude of this probability reflects the degree of discriminatory power of the probabilistic chooser. The current study significantly expands earlier work on the probability that algebraic and probabilistic choosers will select the same maximal alternative. Three factors are found to have an impact on this coincidence probability: the number of attributes of comparison that are being considered, the discriminatory power of probabilistic choosers, and the degree of dependence between attribute rankings. A preliminary version of this paper was presented at the European Operational Research Society Meeting, Budapest, Hungary, July 2000. Support for that initial work was received from the Center for International Programs at the University of Delaware.     

Mapping leisure shopping trip decision making: validation of the CNET interview protocol

Qualitative research methods can provide an in-depth understanding of how people come to certain decisions, providing valuable input to ground behavioural assumptions in activity-based travel demand models and to implement high impact policy measures to change travel behaviour. The CNET interview protocol is a semi-structured personal interview method to elicit the mental representation of individuals’ decision making. There is a risk of bias caused by the interviewer’s interpretation of the respondents’ answers. Therefore, the quality of the CNET interview protocol is assessed by evaluating its trustworthiness using intercoder reliability tests. Krippendorff’s alpha is identified as the most appropriate measure. The intercoder reliability is sufficiently high. Consequently, the CNET interview protocol can be considered a valid method to measure and map individuals’ considerations in complex spatio-temporal decision problems.     

Estimating class‐specific parametric models under class uncertainty: local polynomial regression clustering in an hedonic analysis of wine markets

We introduce a method for estimating multiple class regression models when class membership is uncertain. The procedure—local polynomial regression clustering—first estimates a nonparametric model via local polynomial regression, and then identifies the underlying classes by aggregating sample observations into data clusters with similar estimates of the (local) functional relationships between dependent and independent variables. Finally, parametric functions specific to each class are estimated. The technique is applied to the estimation of a multiple‐class hedonic model for wine, resulting in the identification of four distinct wine classes based on differences in implicit prices of the attributes. Copyright © 2009 John Wiley & Sons, Ltd.     

How do respondents process stated choice experiments? Attribute consideration under varying information load

The popularity of stated choice (SC) experiments has produced many design strategies in which researchers use increasingly more ‘complex’ choice settings to study choice behaviour. When the amount of information to assess increases, we wonder how an individual handles such information in making a choice. Defining the amount of information as the number of attributes associated with each choice set, we investigate how this information is processed as we vary its ‘complexity’. Four ordered heterogeneous logit models are developed, each for an SC design based on a fixed number of attributes, in which the dependent variable defines the number of attributes that are ignored. We find that the degree to which individuals ignore attributes is influenced by the dimensionality of the SC experiment, the deviation of attribute levels from an experienced reference alternative, the use of ‘adding up’ attributes where feasible, the number of choice sets evaluated, and the personal income of the respondent. The empirical evidence supports the view that individuals appear to adopt a range of ‘coping’ strategies that are consistent with how they process information in real markets, and that aligning ‘choice complexity’ with the amount of information to process is potentially misleading. Relevancy is what matters. Copyright © 2006 John Wiley & Sons, Ltd.     

Forecasting one's own preference

This paper compares two methods of making preference judgments based on multi-attribute inputs: (i) an intuitive global evaluation of each input in its totality, (ii) a separate evaluation of each input attribute weighted intuitively to form a linear composite. When judges in psychological, medical and business settings have been asked to make predictive judgments on the basis of multi-attribute input, method (ii) has proved to be superior — with unerring consistency. People are quite poor at making intuitive global judgments based on psychologically incomparable attributes and much poorer than they believe themselves to be. Nevertheless, for various illusiory reasons (e.g., biased feedback, overestimation of the predictability inherent in the situation), people prefer method (i). A preference judgment can be conceptualized as a predictive judgment of one's future ‘state of mind.’ Thus, the research findings strongly suggest that when making preference judgments method (ii) is superior, but will remain less popular than method (i).     

Water allocation under alternative water supply conditions

The purpose of this paper is to develop a method for estimating the marginal value of water to alternative users. The framework developed employs input-output and linear programming methods and is applied to a rural area of South Carolina. Pricing water resources according to their value of marginal product will lead to efficient allocation of the water and maximum Gross Regional Product under alternative water supply conditions.     

Estimation of dynamic panel data models with sample selection

We propose a new method for estimating dynamic panel data models with selection. The method uses backward substitution for the lagged dependent variable, which leads to an estimating equation that requires correcting for contemporaneous selection only. The estimator is valid under relatively weak assumptions about errors and permits avoiding the weak instruments problem associated with differencing. We also propose a simple test for selection bias that is based on the addition of a selection term to the first‐difference equation and subsequent testing for significance of this term. The methods are applied to estimating dynamic earnings equations for women. Copyright © 2011 John Wiley & Sons, Ltd.     

Efficient parameter estimation for independent and INAR(1) negative binomial samples

We consider moment based estimation methods for estimating parameters of the negative binomial distribution that are almost as efficient as maximum likelihood estimation and far superior to the celebrated zero term method and the standard method of moments estimator. Maximum likelihood estimators are difficult to compute for dependent samples such as samples generated from the negative binomial first-order autoregressive integer-valued processes. The power method of estimation is suggested as an alternative to maximum likelihood estimation for such samples and a comparison is made of the asymptotic normalized variance between the power method, method of moments and zero term method estimators.     

Preferences,choices, tournaments: Alternative foundations for the evaluation of voting schemes

The standard assumption underlying most of the negative results of the social choice theory is that the individuals have complete and transitive preference relations over the candidates. As an alternative to this assumption we consider the possibility that individuals can be characterized as possessing preference tournaments (i.e. asymmetric and complete relations) over the candidate set. We discuss the implications of the latter assumption to the negative results of social choice theory. Finally some solution concepts applicable in the individual preference tournament framework are outlined.