Tinbergen in De Economist

Jan Tinbergen's scientific writings cover six main areas of research. His articles in De Economist represent these areas; in some cases the contributions to De Economist were of a pioneering nature (business cycles, economic models, economic integration); in others De Economist was the first or even single outlet for Tinbergen's work. This article provides an overview of these contributions. The wide scope of Tinbergen's areas of research goes together with a unity in approach, the characteristics of which are: policy relevance, quantification and measurement, balance in analysis and presentation, and learning from experience. Tinbergen's articles in De Economist bear witness to this approach which at the time also met with scepticism and resistance as this overview shows. According to Houthakker, Tinbergen's main contribution may be that, amidst the pleas of interest groups and the slogans of the laity, an attempt is made that the voice of the professional economic researcher be heard. Tinbergen's work still sets an agenda for both economic research and policy making.     

EARNINGS EXPECTATIONS, FIRM SIZE, AND THE INFORMATIVENESS OF STOCK PRICES

The notion that prices impound a wide array of information, including market expectations, has led to earnings forecast models conditioned on prices. Yet, presumably, analysts' forecasts capture both public information and certain private information not previously impounded in prices. Accordingly, price-based models are seemingly an inefficient, and less effective, source of expecta-tions. This article investigates this hypothesis using financial analysts', price-based, and naive forecasts. Results indicate that analysts' forecasts (1) are at least as accurate as price-based and naive models, and (2) yield better expectations for market tests relating returns and earnings. These inferences are robust across different information environments. The evidence suggests that analysts either possess private information or are more effective information processors, or both.     

A Comparison of Cost of Equity Estimates of Local and Global CAPMs

Cost of equity estimates are compared for three pricing models: the traditional local CAPM, the single (market) factor global CAPM, and the two‐factor global CAPM, with both market and currency index factors. For 2989 US stocks, the average difference in the cost of equity estimates is about 48 basis points between the local CAPM and the single‐factor global CAPM, and is about 61 basis points between the two global models. For 70 developed‐market ADRs, the corresponding average differences are 76 and 47 basis points, respectively. For 48 emerging‐market ADRs, the corresponding average differences are 57 and 70 basis points.     

Polynomial approximations in cross-sectional models

The time-series distributed lag techniques of econometrics can be usefully applied to cross-sectional, spatial and cross-section time-series situations. The application is perfectly natural in cross-section, time-series models when regression coefficients evolve systematically as the cross-section grouping variable changes. The evolution of such coefficients lends itself to polynomial approximation or more general smoothing restrictions. These ideas are not new, Gersovitz and McKinnon (1978) and Trivedi and Lee (1981) providing two of the earliest applications of cross-equation smoothing techniques. However, their applications were in the context of coefficient variation due to seasonal changes and this may account for the non-diffusion of these techniques. The approach here is illustrated in the context of age-specific household formation equations based on census data, using Almon polynomials when the regression coefficients vary systematically by age group. A second application is provided, using spatial data, explaining the incidence of crime, by region; using polynomial and geometric smoothing to model distance declining regional effects.     

The evaluation stage in marketing decision making

Prior to making important decisions, marketing managers go through an evaluation process in which available alternatives are compared. Yet, no systematic discussion of the evaluation process exists in the marketing literature. This article reviews the marketing and behavioral decision theory literature in order to identify factors that may cause errors in the two fundamental elements of the evaluation process—the estimation of probabilities and the determination of the value of outcomes. Propositions are developed that specify circumstances in which marketing management decisions may be influenced by judgmental biases, and procedures are identified for debiasing such judgments.     

Cognitive processing models in performance appraisal: evidence from the Malaysian education system

The effectiveness of the decision‐making process in appraisal has been of long‐standing interest. This paper reports the results of research exploring the extent to which those undertaking appraisals apply systematic processes to their decision‐making, represented in terms of the cognitive processing models applied by appraisers. Results of 22 cognitive mapping interviews exploring appraisal practice, undertaken with appraisers in the Malaysian education system, are described. The resultant cognitive maps have been explored for what they tell us about the cognitive processing models underlying appraisers' decision‐making. Results suggest that the practice of appraisal evidenced in interviews demonstrates the presence of cognitive processing that reflects theoretical cognitive processing models, although some differences are observed between less experienced and experienced appraisers' models. Implications from the interview findings for the practice of appraisal are identified.