Pre-testing for linear restrictions in a regression model with spherically symmetric disturbances

In this paper we derive the exact risk (under quadratic loss) of pre-test estimators of the prediction vector and of the error variance of a linear regression model with spherically symmetric disturbances. The pre-test in question is one of the validity of a set of exact linear restrictions on the model's coefficient vector. We demonstrate how the known results for the model with normal disturbances can be extended to this broader case. We also show that the critical value of unity results in a minimum of the risk of the pre-test estimator of the error variance. To illustrate the results we assume multivariate Student-t regression disturbances and numerically evaluate the derived expressions.     

Spirituality: Creating meaning and purpose for students the corporate way

“Although American higher education can justifiably take pride in its capacity to develop the student's ability to manipulate the material world through its programs in science, medicine, technology, and commerce, it has paid relatively little attention to the student's “inner” development—the sphere of values and beliefs, emotional maturity, moral development, spirituality, and self‐understanding.” —from the Foreword to Encouraging Authenticity and Spirituality in Higher Education by Alexander W. Astin and Helen S. Astin     

Reviews

REGIONAL POLITICS: GERMAN AND BRITISH.

Anderson, Jeffrey J. 1992: The Territorial Imperative: Pluralism, Corporatism and Economic Crisis. Cambridge University Press, £35 hardback.

COMMUNITIES ON THE PERIPHERY: THAMESMEAD AND AAMSTERDAM NORTH.

Coping with Social and Economic Change at Neighbourhood Level: Final Reports on the Netherlands and the UK of Research carried out for the European Foundation for the Improvement of Living and Working Conditions.

GETTING A NEW START?

White, M. and Lakey, J. 1992: The Restart Effect — Does Active Labour Market Policy Reduce Unemployment? Policy Studies Institute.

JOB SEARCH AND MISMATCH IN CITIES.

Simpson, W. 1992: Urban Structure and the Labour Market: Worker Mobility, Commuting, and Underemployment in Cities. Oxford: Clarendon Press, £25 hardback.     

Implications of Stratified Sampling for Fair Lending Binary Logit Models

We examine the effect of sample design on estimation and inference for disparate treatment in binary logistic models used to assess for fair lending. Our Monte Carlo experiments provide information on how sample design affects efficiency (in terms of mean squared error) of estimation of the disparate treatment parameter and power of a test for statistical insignificance of this parameter. The sample design requires two decision levels: first, the degree of stratification of the loan applicants (Level I Decision) and secondly, given a Level I Decision, how to allocate the sample across strata (Level II Decision). We examine four Level I stratification strategies: no stratification (simple random sampling), exogenously stratifying loan cases by race, endogenously stratifying cases by loan outcome (denied or approved), and stratifying exogenously by race and endogenously by outcome. Then, we consider five Level II methods: proportional, balanced, and three designs based on applied studies. Our results strongly support the use of stratifying by both race and loan outcome coupled with a balanced sample design when interest is in estimation of, or testing for statistical significance of, the disparate treatment parameter.     

Does trading volume detect information content in earnings reconciliations of foreign firms?

Currently, foreign firms trading securities on U.S. markets provide periodically a quantitative reconciliation of selected financial data consistent with U.S. GAAP (hereafter referred to as reconciled information) in Form 20-F. The SEC is examining whether users believe that this reconciliation process provides additional information above that provided by the foreign GAAP earning announcement and whether this incremental information enhances usefulness for market participants. We examine whether the reconciliation affects a primary indicator of information usefulness: the trading volume of capital markets participants.We use a regression model to examine the relation between a measure of abnormal trading volume and four firm-specific variables in the firm's information environment: similarities of accounting systems, analyst following, difference between reconciled earnings and foreign GAAP earnings, and dispersion of analysts’ expectations. We find a significant relation between abnormal volume and the reconciled earnings number and between abnormal volume and the dispersion of analysts forecasts. Our findings suggest that market participants may use the 20-F reconciliation in trading decisions.