Cognitive competence of older consumers

Older adult memory performance declines with age. However, memory for newly learned material is only one measure of cognitive competence. This article reviews research that measured older adult cognitive performance using tasks that tap crystallized abilities, everyday problem solving, and those that used older expert subjects. The results indicate that many cognitive functions remain stable from middle age onward. This suggests that cognitive decline is not an inevitable result of aging per se. This implies that antecedents of cognitive decline, such as health, should be used as a segmentation variable for the older adult market. © 1995 John Wiley & Sons, Inc.     

OPENING RETURNS,NOISE, AND OVERREACTION

In this article a partial‐adjustment model, which shows how equity prices fail to adjust instantaneously to new information, is estimated using a Kalman filter. For the components of the Dow Jones Industrial 30 index I aim to identify whether overreaction or noise is the cause of serial correlation and high volatility associated with opening returns. I find that the tendency for overreaction in opening prices is much stronger than for closing prices; therefore, overreaction rather than noise may account for differences in the return behavior of opening and closing returns. JEL classification: G15     

Mean Reversion in the Short Horizon Returns of UK Portfolios

This paper will show that short horizon stock returns for UK portfolios are more predictable than suggested by sample autocorrelation co-efficients. Four capitalisation based portfolios are constructed for the period 1976–1991. It is shown that the first order autocorrelation coefficient of monthly returns can explain no more than 10% of the variation in monthly portfolio returns. Monthly autocorrelation coefficients assume that each weekly return of the previous month contains the same amount of information. However, this will not be the case if short horizon returns contain predictable components which dissipate rapidly. In this case, the return of the most recent week would say a lot more about the future monthly portfolio return than other weeks. This suggests that when predicting future monthly portfolio returns more weight should be given to the most recent weeks of the previous month, because, the most recent weekly returns provide the most information about the subsequent months' performance. We construct a model which exploits the mean reverting characteristics of monthly portfolio returns. Using this model we forecast future monthly portfolio returns. When compared to forecasts that utilise the autocorrelation statistic the model which exploits the mean reverting characteristics of monthlyportfolio returns can forecast future returns better than the autocorrelation statistic, both in and out of sample.     

Book reviews

Journal of Economics -     

Local measured telephone service in the USA: A quantitative analysis

The USA has steadfastly held to a flat rate for local telephone service, whereas most other countries are characterized by a user-sensitive (measured service) system of pricing. Economic theory suggests some method of measured service pricing more accurately reflects the true costs of local service. This article seeks to determine how many US consumers could be induced to switch to measured service pricing, and using ordinary least squares, derives a model of the demand for measured service. The factors are identified that will induce the US population to move towards a measured service rate structure. The findings indicate that consumers are quite responsive to both relative price (between a local flat rate and a measured service rate) and advertising.     

The quartiles of the maximum entropy distribution

The quartile points and interquartile range of the maximum entropy (ME) distribution and sample distribution are compared, using expected values for sampling from a standard normal population. For sample sizes n?20 such that the sample quartile points are uniquely defined, the ME quartile points and interquartile range are found to have lower mean-squared error (MSE).     

FINANCIAL FUTURES AND IMMUNIZATION

This paper investigates the ability of any portfolio that contains both bonds and financial futures contracts to immunize a lump sum liability having the same initial duration and value as the portfolio itself. An analysis of second order conditions shows that immunization against a local change in interest rates is possible only if the number of futures contracts lies within a critical interval; the endpoints depend on cash flow characteristics of the specific bonds and contract being combined. Immunization against any large change in rates is impossible if the portfolio contains any long position in futures but is achieved by some portfolios that contain short positions in futures.     

Crossing Disciplines: A Constraint‐Based Model of the Creative/Innovative Process

This paper argues that artistic creativity and organizational innovation share a common problem‐solving process. The process per se is presented as a complement to the jazz metaphor for understanding organizational innovation. As modeled, it involves paired constraints that limit and direct search for a solution path. One of each pair identifies something to be precluded; the other specifies its substitute. The process can be initiated by necessity or by design. Once begun, the process is iterative: one substitution pair necessitates another. The creation/innovation is the novel solution path created by the substitution series. In‐depth analyses of two artistic creators are accompanied by allusions to parallel examples in organizational innovation.     

Developing Technological Stance: Children's Learning in Technology Education

Following a review of current research in children's learning in technology education, and an examination of the kinds of knowledge demanded in contemporary technology education programs in elementary schools, I argue that what is needed in early technology education programs is the scaffolding of what I am calling technological stance. This construct acknowledges the socio-cultural character of technology as a human endeavor. In contrast to programs which are oriented to application of conceptual and procedural knowledge or to programs in which knowledge is generated through interpretation of interactions with materials and tools, programs which support technological stance position learners as critical inquirers into both tool-related and discursive practices of technology.