Evaluation of national foresight activities: Assessing rationale, process and impact

The paper addresses the question of what constitutes an appropriate evaluation strategy for national foresight activities in different situations. The variety of rationales for foresight is explored, ranging from a desire to set priorities through to participation-oriented goals and building new networks around common visions and strategies. A generational model of foresight is used to show the evolution of key evaluation issues. The generic motivations for evaluation of accountability, justification and learning are discussed in the context of foresight. Evaluation grounded in the concept of behavioural additionality and the systems failure rationale is shown to be more suited as a rationale for foresight as public policy.Assessing the effects of foresight requires an understanding that it is only one of several influences on public policy. To be effective it needs to be tuned into the strategic behaviour and cycles of policy and economic actors. Cases are presented of evaluation of foresight programmes in the United Kingdom, Germany and Hungary. It is concluded that there is no “one-size-fits-all” evaluation approach and that the method selected is conditioned by motivation, timing and the level of aggregation. Foresight cannot be fully evaluated independently from its context. Foresight is being strengthened by the emergence of rigorous and systematic knowledge to assist learning and improvement.     

Differences in the Cost of Trade Execution Services on Floor-Based and Electronic Futures Markets

This paper provides new evidence on the impact of electronic trading on brokerage commissions by investigating a sample period that covers the period of transition from floor to electronic trading on the Sydney Futures Exchange. After controlling for liquidity, volatility and broker identity, the introduction of electronic trading remains to be associated with lower brokerage commissions relative to floor markets. The study also provides new evidence on brokerage commissions in futures markets finding that commission fees charged on futures trades average 0.002% of transaction value. This is up to 120 times smaller than the magnitude of brokerage fees charged in stock markets, and considerably lower than the magnitude of brokerage fees assumed for futures markets in previous research. Consistent with existing studies based on stock markets, commissions charged per contract decrease with order size reflecting economies of scale in the provision of brokerage services in futures markets. Commission rates are positively related to bid-ask spreads and price volatility, which proxy for the probability of execution error costs and execution difficulty, respectively. Finally, the identity of the broker is found to be a significant determinant of commissions reflecting different pricing schedules across brokers.     

How many factors are important in U.K. stock returns?

I use the sequential approach of Harvey and Liu ([2018]. Lucky factors (Working Paper). Duke University) to build linear factor models in U.K. stock returns among a set of 13 candidate factors using individual stocks and three groups of test portfolios between July 1983 and December 2017. My study finds that the Market factor is the dominant factor in reducing mispricing in individual stocks and test portfolios regardless of the pricing error metric used. The Market factor has a bigger impact when using a value weighting pricing error metric. Whether a second factor is used or not depends upon which metric is used for mispricing and the time period examined. My study finds support for a two-factor model for the whole sample period of the Market factor and the Conservative Minus Aggressive (CMA) factor of Fama and French ([2015]. “A five-factor asset pricing model.” Journal of Financial Economics 116: 1–22) when giving greater weight to the mispricing of larger companies.     

Do optimal diversification strategies outperform the 1/N strategy in U.K. stock returns?

This paper examines whether optimal diversification strategies outperform the 1/N strategy in U.K. stock returns. The study focuses on the performance of recent strategies developed by Tu and Zhou (2011) and Kirby and Ostdiek (2010). I find that a number of optimal asset allocation strategies can significantly outperform the 1/N strategy even after adjusting for trading costs. The strategies developed by Kirby and Ostdiek outperform the 1/N strategy, even at higher trading costs, due to the low turnover of these strategies. The strategies of Tu and Zhou have mixed performance after adjusting for trading costs due to the high turnover of these strategies. The results of the paper provide support for the use of optimal diversification strategies.     

From priority-setting to articulation of demand: Foresight for research and innovation policy and strategy

The paper addresses the application of foresight to research and innovation policy and strategy. It seeks to show an evolution away from a traditional focus on broad-based technological priority setting to a much more focussed and adapted set of applications. The inherent limitations of prioritisation processes are discussed. The more limited aim of articulating specific fields is noted. Recent trends in research and innovation policy have opened new opportunities for the application of foresight. Systemic and demand-side policies require a shared vision on the part of purchasers and suppliers. The role of foresight in such contexts needs both to be enhanced and better understood.An increasing structural focus for foresight exercises is associated not only with broader R&I system reform but also with an engagement with new-wave innovation policies. The success of demand-side measures such as cluster policies and the use of procurement or regulation to stimulate innovation is dependent upon the formation of a common vision between the supply and demand sides, opening the possibility for the application of foresight approaches. We note the emergence of a combination of corrective, disruptive and creative roles.     

An Examination of Alternative Factor Models in UK Stock Returns

This paper examines the mean-variance efficiency of a number offactor models in UK stock returns. The paper also explores, using theapproach of MacKinlay (1995), whether missing risk factors ornonrisk-based explanations best explain the pricing errors of thedifferent factor models. The evidence in the paper suggests that themean-variance efficiency of each factor model is rejected and missing riskfactors are unable to explain the pricing errors of any of the models.Some nonrisk-based explanations, which posit a wide spread in abnormalreturns, may be a more plausible source of explaining the pricing errorsof the factor models.     

Economics at the Antitrust Division: 2017–2018

This article describes some of the work of Antitrust Division economists over the past year, with a focus on modeling. It begins by illustrating the mapping from evidence to prediction using tools for assessing the effects of mergers using Bertrand, Cournot, and auction models. It then turns to two hot topics in competition policy: the implications of claims of increasing margins for merger enforcement and the validity of claims of increasing concentration. Finally, it considers how mergers affect prices in bargaining models.