Model selection for forecast combination

In this paper it is advocated to select a model only if it significantly contributes to the accuracy of a combined forecast. Using hold-out-data forecasts of individual models and of the combined forecast, a useful test for equal forecast accuracy can be designed. An illustration for real-time forecasts for GDP in the Netherlands shows its ease of use.model selection;forecast combination

Forecasting 1 to h steps ahead using partial least squares.

This paper proposes a methodology to jointly generate optimal forecastsfrom an autoregression of order p for 1 to h steps ahead. The relevant model isa Partial Least Squares Autoregression, which is positioned in between a singleAR(p) model for all forecast horizons and different AR models for differenthorizons. Representation, estimation and forecasting using the new model arediscussed. An illustration for US industrial production shows the merits ofthe methodology.forecasting;autoregression;partial least squares

Inequality amongst the wealthiest and its link with economic growth

In this paper we correlate the key features of the distribution of wealth of the 500 wealthiest individuals in the Netherlands with economic growth and stock market returns for 1998 to 2009. We show that each year the distribution obeys a power law and that the key parameter measures the degree of inequality. Our main finding is that more inequality amongst the wealthiest is associated with higher economic growth.economic growth;power law;wealth distribution

How do we pay with euro notes? Empirical evidence from Monopoly experiments

In contrast to abundant theoretical literature, there are almost no empirical studies on how individuals actually deal with cash. In this paper we analyze euro transactions, made during various games of Monopoly® (European edition), where in some games we deliberately left out one of the notes. We find that not having access to 100-euro or 10-euo notes is not as problematic for payment behavior as it is for not having 200-euro and 20-euro notes. We also find that the 50-euro note plays a crucial role in actual payments.Poisson regression model;euro cash;experiments;payment behavior

Common large innovations across nonlinear time series

We propose a multivariate nonlinear econometric time series model, which can beused to examine if there is common nonlinearity across economic variables. Themodel is a multivariate censored latent effects autoregression. The key featureof this model is that nonlinearity appears as separate innovation-likevariables. Common nonlinearity can then be easily defined as the presence ofcommon innovations. We discuss representation, inference, estimation anddiagnostics. We illustrate the model for US and Canadian unemployment and findthat US innovation variables have an effect on Canadian unemployment, and notthe other way around, and also that there is no common nonlinearity across theunemployment variables.Nonlinearity;Censored latent effects autoregression;Common features

Seasonality in revisions of macroeconomic data

We analyze five vintages of eighteen quarterly macroeconomic variables for the Netherlands and we focus on the degree of deterministic seasonality in these series. We document that the data show most such deterministic seasonality for their first release vintage and for the last available vintage. In between vintages show a variety of seasonal patterns. We show that seasonal patterns in later vintages can hardly be predicted by those in earlier vintages. The consequences of these findings for the interpretation and modeling of macroeconomic data are discussed.seasonality;real-time data

Does ratification matter and do major conventions improve safety and decrease pollution in shipping?

We develop a method which measures the effect of the major international conventions in the area of safety, pollution, search and rescue and work related measures. We further distinguish between the effect of entry into force and the status of ratification of a convention by its parties. We use standard econometric models and base our analysis on a unique dataset of 30 years of monthly data where we correct for other factors which can influence safety such as safety inspections and ship economic cycles. The results show a complex picture where the average time between adoption and entry into force was calculated to be 3.1 years. Overall, the more parties ratify a convention, the more likely safety is improved and pollution is decreased although one can detect a certain level of non compliance. The immediate effect of entry into force presents a mixed picture where most negative effects can be found with legislation in the area of safety management and pollution, followed by technical areas. The effect of legislation in the areas related to working and living conditions and certification and training is smallest. Seasonality can be found with peaks in December and January for all conventions but are less important for pollution.

A generalized dynamic conditional correlation model for many asset returns

In this paper we put forward a generalization of the Dynamic Conditional Correlation (DCC) Model of Engle (2002). Our model allows for asset-specific correlation sensitivities, which is useful in particular if one aims to summarize a large number of asset returns. The resultant GDCC model is considered for daily data on 18 German stock returns, which are all included in the DAX, and for 25 UK stock returns in the FTSE. We find convincing evidence that the GDCC model improves on the DCC model and also on the CCC model of Bollerslev (1990).multivariate GARCH;dynamic conditional correlation

Forecasting high-frequency electricity demand with a diffusion index model.

We propose a discussion index model (Stock and Watson, 2002) to fore-cast electricity demand for one hour to one week ahead. The model isparticularly useful as it captures complicated seasonal patterns in thedata. The forecast performance of the proposed method is illustratedwith a simulated real-time experiment for datafrom the Pennsylvania-New Jersey-Maryland Interchange.seasonality;diffusion index forecast;electricity load

Comprehensive review of the maritime safety regimes.

This report presents a comprehensive review of the maritime safety regimes and provides recommendations on how to improve the system. The results show a complex legal framework which generates a high amount of inspections and overlapping of inspection areas where no cross-recognition is established by the various stakeholders. While the safety system seems to be successful in eliminating substandard vessels and while average insurance claims costs are substantially lower for inspected vessels than not inspected vessels, the results indicate that the economic conditions of the shipping market also have an effect on safety quality besides the frequency of inspections. No significant differences can be found between industry inspections and port state control inspections with respect to decreasing the probability of casualty. The system could be made more effective by combining data sources on inspections and use them respectively to improve risk profiling and to decrease the frequency of inspections performed on ship types such as tankers. The results further indicate a lack of proper implementation of the International Safety Management Code (ISM code) and conventions with reference to working and living conditions of crew (ILO 147). A revision of the ISM code and more emphasis on enforcement of ILO 147 could further enhance the level of safety at sea. The authors would like to thank several inspection regimes for their cooperation in providing inspection data and in allowing the observation of surveys and inspections on 26 vessels. In addition, the authors would like to acknowledge the data providers for the casualty data, Clarkson’s for the economic data as well as two P&I Clubs in making data on insurance claims available.