Prequential analysis of stock market returns

The Brier score and a covariance partition due to Yates are considered to study the probabilistic forecasts of a vector autoregression on stock market returns. Probabilistic forecasts from a model and data developed by Campbell (1991 Campbell, JY. 1991. A variance decomposition for stock returns. Economic Journal, 101: 157–79.  ) are studied with ordinary least squares. Calibration measures and the Brier score and its partition are used for model assessment. The partitions indicate that the ordinary least squares version of Campbell's model does not forecast stock market returns particularly well. While the model offers honest probabilistic forecasts (they are well-calibrated), the model shows little ability to sort events that occur into different groups from events that do not occur. The Yates-partition demonstrates this shortcoming. Calibration metrics do not.     

Efficiency in the NFL betting market: modifying and consolidating research methods

Modifying and consolidating previous research methods to generate more reliable estimates, some fairly weak evidence is found of inefficiency in the NFL betting market resulting from a bias favouring home underdog (against away favourite) teams. In contrast to previous research, no evidence is found that ‘momentum strategies’ generate significant returns in this market.     

Forecasting the real output using fractionally integrated techniques

The annual structure of the real GDP in the UK, France, Germany and Italy is examined by means of fractionally integrated techniques. Using a version of a testing procedure due to Robinson (Journal of the American Statistical Association, 84, –37, 1994), it is shown that the series can be specified in terms of I(d?) statistical models with d higher than 1. Thus, the series are nonstationary and non-mean-reverting. The forecasting properties of the selected models for each country are also examined.     

The process followed by PPP data. On the properties of linearity tests

Recent research has reported the lack of correct size in stationarity test for PPP deviations within a linear framework. However, theoretically well motivated non-linear models, such as the ESTAR, appear to parsimoniously fit the PPP data and provide an explanation for the PPP ‘puzzle’. Employing Monte Carlo experiments the size and power of the non-linear tests are analysed against a variety of nonstationary hypotheses. Aslo the ESTAR model is fitted to data from high inflation economies. The results provide further support for ESTAR specification.     

Options-based forecasts of futures prices in the presence of limit moves

The reported analysis examines a simultaneous estimation option-based approach to forecast futures prices in the presence of daily price limit moves. The procedure explicitly allows for changing implied volatilities by estimating the implied futures price and the implied volatility simultaneously. Using futures and futures options data for three agricultural commodities, it is found that the simultaneous estimation approach accounts for the abrupt changes in implied volatility associated with limit moves and generates more accurate price forecasts than conventional methods that rely on only one implied variable.     

Oligopoly and Merger: A Simple Classroom Game

Professor Miller describes a game which has been used in intermediate price theory courses as well as in introductory classes. Two versions are presented—a duopoly and a six-firm market, both with undifferentiated product and a known market demand schedule. Students are also asked to make a monopoly of the six firms by forming a trust or holding company. Miller contends that the game is more stimulating than lectures aud suspects that it will result in longer retention.     

Ceteris Paribus Methodology and Computerized Economics-Business Models

Professor Stanford is critical of computer programs that have been developed for use in economics and business courses. He admits to having “mixed feelings” about the use of computer models as classroom teaching devices, but recognizes their great potential. His fear is that the ceteris paribus methodology has not been adequately implemented when computer models have been constructed for use in the classroom. Consequently, he has constructed a set of computerized game models which feature “options for varying degrees of complexity.” These models, which permit progression from the simple to the complex, and which enable instructors to demonstrate the effects of changing variables, are brielly described in this article.     

Gender Differences in Economic Knowledge: A Reevaluation of the Evidence

This study examines the importance and significance of male-female differences in understanding and learning economics and attempts to assess whether the use of multiple choice questions, rather than essay questions, contributes to these measured differences. Do multiple choice questions favor men with their possibly superior spatial and numerical skills? Do essay questions favor women with their possibly superior verbal skills? Evidence based on a study involving 589 students using an examination including both types of questions is analyzed in this article.     

Learning Objectives and Testing: An Analysis of Six Principles of Economics Textbooks,Using Bloom's Taxonomy

This study applies Bloom's Taxonomy of Educational Objectives to six principles of economics textboks and the accompanying instructor's manuals to determine whether the test banks provided are likely to measure the textbooks' stated objectives. The study finds significant discrepancies between the stated objectives of most textbooks and the instruments included in the instructor's manuals to measure student achievement.     

The Aggregate Demand Curve and Its Proper Interpretation

Textbook authors, in their presentations of aggregate demand–aggregate supply, are admonished to set their houses in order. The writers suggest the continued usefulness of the traditional “Keynesian cross” model as a pedagogical device and present a version that they allege to be superior to the popular AD–AS models found in many contemporary texts.