Further insights on the puzzle of technical analysis profitability

This paper extends current results concerning technical analysis efficiency on the foreign exchange market and attempts to determine whether filtering the raw exchange rate series with some trading rule significantly changes its characteristics. Because of the non-normality of exchange rate series, bootstrap methods are used on the main daily exchange rates since 1974 to show technical analysis performance. The technical analysis strategy tested generates returns whose distribution is significantly different from the basic series. The robustness of the results is tested in and out-of-sample and an explanation of the technical analysis performance based on its filtering properties is suggested.     

A contribution to estimate a benchmark capital stock. An optimal consistency method

There are alternative methods of estimating capital stock for a benchmark year. However, these methods are costly and time‐consuming, requiring the gathering of much basic information as well as the use of some convenient assumptions and guesses. In addition, a way is needed of checking whether the estimated benchmark is at the correct level. This paper proposes an optimal consistency method (OCM), which enables a capital stock to be estimated for a benchmark year, and which can also be used in checking the consistency of alternative estimates. This method, in contrast to most current approaches, pays due regards both to potential output and to the productivity of capital. It is applied to 45 cases for nine OECD countries and six Latin American ones. It works reasonably well, and it requires only small amounts of data, which are readily available. It appears to exhibit similar accuracy to alternative methods, but it is virtually inexpensive in both time and funding.     

Network Effects and Infrastructure Productivity in Developing Countries*

This study proposes to investigate the threshold effects in the productivity of infrastructure investment in developing countries. It concludes to their presence in the relationship between output and private and public inputs as well as network effects in the productivity of infrastructure. When the available stock of infrastructure is low, investment has the same productivity as non‐infrastructure investment. On the contrary, when a minimum network is available, the marginal productivity of infrastructure investment is greater than the productivity of other investments. Finally, when the main network is achieved, its marginal productivity becomes similar to the productivity of other investment.     

MONTHLY GDP FORECASTING USING BRIDGE MODELS: APPLICATION FOR THE FRENCH ECONOMY

This paper presents a model to predict French gross domestic product (GDP) quarterly growth rate. The model is designed to be used on a monthly basis by integrating monthly economic information through bridge models, for both supply and demand sides, allowing thus economic interpretations. For each GDP component, bridge equations are specified by using a general‐to‐specific approach implemented in an automated way by Hoover and Perez and improved by Krolzig and Hendry. This approach allows to select explanatory variables among a large data set of hard and soft data. A rolling forecast study is carried out to assess the forecasting performance in the prediction of aggregated GDP, by taking publication lags into account in order to run pseudo real‐time forecasts. It turns out that the model outperforms benchmark models. The results show that changing the set of equations over the quarter is superior to keeping the same equations over time. In addition, GDP growth seems to be more precisely predicted from a supply‐side approach rather than a demand‐side approach.     

Risk Attitudes Appraisal and Cognitive Coordination in Decentralized Decision Systems

In decentralized decisions systems, coordination and efficiency encounter major difficulties. To solve the problem, it is argued, the analyst needs to raise a cognitive representation question, in particular the question of the criteria according to which the problem at hand is being assessed in view of the whole organization. This, in turn, raises the issue of how these criteria are evaluated by the different individuals. An example based on a subset of the risk management system, namely the maintenance system in nuclear power plants, is used throughout the text. The paper argues that generalizing MAUT to rank dependent risk treatment is of utmost importance in order to deal with such problems. One additional theorem is proved in that perspective and an appropriate software reported upon and illustrated on an example. Beyond the technical problems examined in the paper, the way to use the decision analysis framework is discussed.     

TESTING FOR ASSET MARKET LINKAGES: A NEW APPROACH BASED ON TIME‐VARYING COPULAS

This paper proposes a new approach based on time‐varying copulas to test for the presence of increases in stock market interdependence (also known as shift contagion) after a financial crisis. We discuss the importance of considering simultaneously separate breaks in volatility and dependence. Without such consideration, the contagion test turns out to be biased. A sequential algorithm is proposed to tackle this problem. Applied to the recent 1997 Asian crisis, the analysis confirms that breaks in variances always precede those in the dependence parameter. Moreover, a significant ‘J‐shape’ evolution of the dependence parameter is detected, supporting the idea of shift contagion.     

Assessing a Perfect European Optimum Currency Area: A Common Cycles Approach

In this paper we introduce a new definition for an optimum currency area (OCA) which is more restrictive than the previous ones. Indeed, using both a cointegration and a common cyclical feature analysis in a VAR(p)framework, a set of countries is said to constitute a perfect OCA if theshort-run dynamics is perfectly correlated while long-run relationships arenot constrained. Using seasonally unadjusted industrial production indicesfor the period 75:M1 to 97:M4, we show that European countries are notsufficiently related to fit our definition.     

Housing crowding in developing countries and willingness to pay for additional space: The case of Korea

The very rapid rates of urban population growth in developing countries is placing great strain on their housing stock. Housing policies which are aiming at reducing or eliminating crowding are generally based on notions of ‘needs’ and ‘standards of adequacy’ which are more often based on arbitrarily selected criteria than on domestic economic conditions. The aim of this paper is to evaluate the willingness to pay for the additional housing space by households and the validity of target housing standards. The three methods used show consistently that — at least in Korea — the willingness to pay for additional space is less than 25 percent of the value of an extra unit of space, everything else being equal.     

White Flight or Flight from Poverty?

The phenomenon of White flight is often illustrated by the case of Detroit whose population dropped from 1.80 to 0.95 million between 1950 and 2000 while at the same time its Black and Hispanic component grew from 30 to 85%. But is this case really representative? The present paper shows that the phenomenon of White flight is in fact essentially a flight from poverty. As a confirmation, we show that the changes in White or Black populations are highly correlated which means that White flight is always paralleled by Black flight (and Hispanic flight as well). This broader interpretation of White flight accounts not only for the case of northern cities such as Cincinnati, Cleveland or Detroit, but for all population changes at county level, provided the population density is higher than a threshold of about 50 km² which corresponds to moderately urbanized areas (as can be found in states like Indiana or Virginia for instance).