Bayesian clustering with priors on partitions

Traditional clustering algorithms are deterministic in the sense that a given dataset always leads to the same output partition. This article modifies traditional clustering algorithms whereby data are associated with a probability model, and clustering is carried out on the stochastic model parameters rather than the data. This is done in a principled way using a Bayesian approach which allows the assignment of posterior probabilities to output partitions. In addition, the approach incorporates prior knowledge of the output partitions using Bayesian melding. The methodology is applied to two substantive problems: (i) a question of stylometry involving a simulated dataset and (ii) the assessment of potential champions of the 2010 FIFA World Cup.     

Economic Policy: Bold or Foolhardy?

The publication of a book by Professor Sir Alan Waiters, Personal economic adviser to Mrs Thatcher, provokes Tim Congdon of the stockbrokers L. Messel & Co., to examine the theoretical rationale of fiscal and monetary policy in the first few years of what detractors have called 'the Thatcher experiment'.     

The anatomy of productivity growth slowdown and recovery in Canadian manufacturing, 1970–79

A micro-database that tracks individual establishments (plants) in the Canadian manufacturing sector through the 1970s is used to analyse the productivity growth slowdown and partial recovery that occurred over that decade. The data allow us to distinguish between the performance within individual plants and ‘structural’ changes, such as entry and exit and intra- and inter-industry shifts in the distribution of output as contributing factors to changes in productivity growth. The main finding is that fluctuations within plants were responsible for nearly all of the slowdown, and for most of the partial recovery, though the latter was also helped by a reallocation of output shares within manufacturing towards lower cost industries.     

Cable and satellite TV in the UK and Europe: The emerging legal issues

The impact of satellite and cable TV on existing laws and regulatory frameworks will be considerable. This article reviews the impact on advertising, copyright protection, copyright licensing, programme content, rights of reception and distribution of television signals, and performers rights within the context of the UK, European and international contexts. Many problems exist and are unlikely to be resolved for some time.     

Negotiated versus Cost-Based Transfer Pricing

This paper studies an incomplete contracting model to compare the effectiveness of alternative transfer pricing mechanisms. Transfer pricing serves the dual purpose of guiding intracompany transfers and providing incentives for upfront investments at the divisional level. When transfer prices are determined through negotiation, divisional managers will have insufficient investment incentives due to hold-up problems. While cost-based transfer pricing can avoid such hold-ups, it does suffer from distortions in intracompany transfers. Our analysis shows that negotiation frequently performs better than a cost-based pricing system, though we identify circumstances under which cost-based transfer pricing emerges as the superior alternative.     

No-arbitrage semi-martingale restrictions for continuous-time volatility models subject to leverage effects,jumps and i.i.d. noise: Theory and testable distributional implications

We develop a sequential procedure to test the adequacy of jump-diffusion models for return distributions. We rely on intraday data and nonparametric volatility measures, along with a new jump detection technique and appropriate conditional moment tests, for assessing the import of jumps and leverage effects. A novel robust-to-jumps approach is utilized to alleviate microstructure frictions for realized volatility estimation. Size and power of the procedure are explored through Monte Carlo methods. Our empirical findings support the jump-diffusive representation for S&P500 futures returns but reveal it is critical to account for leverage effects and jumps to maintain the underlying semi-martingale assumption.