Dennis Olson

Have trading rule profits in the currency markets declined over time

Abstract Previous studies have reported mixed results regarding the success of technical trading rules in currency markets. Abnormal returns were observed in many studies using data up to the mid 1980s, while more recent studies generally report less success for technical trading rules. This paper tests whether moving average trading rule profits have declined over the period from 1971 to 2000. If so, previous profits may represent a temporary inefficiency that has since been eliminated in the currency markets. The hypothesis is tested using 18 exchange rate series over a longer time period than in previous studies. Rules are optimized for successive 5-year in-sample periods from 1971 to 1995 and tested over subsequent 5-year out-of-sample periods. Results show that risk-adjusted trading rule profits have declined over time-from an average of over 3% in the late 1970s and early 1980s to about zero in the 1990s. Thus, market inefficiencies reported in previous studies may have been only temporary inefficiencies.

Neural network forecasts of Canadian stock returns using accounting ratios

Abstract This study compares neural network forecasts of one-year-ahead Canadian stock returns with the forecasts obtained using ordinary least squares (OLS) and logistic regression (logit) techniques. The input data are 61 accounting ratios for 2352 Canadian companies over the period 1976–1993. The most recent 6 years of data are rolled forward each year to forecast annual returns for 1983–1993. Our results indicate that back propagation neural networks, which consider non-linear relationships between input and output variables, outperform the best regression alternatives for both point estimation and in classifying firms expected to have either high or low returns. The superiority of the neural network models translates into greater profitability using various trading rules. Classification models out perform point estimation models, but four to eight output categories appear to give better results for both logit and neural network models than either binary classification models or models with 16 classification categories.

The Interindustry Employment Demand Variable: An Extension of the I-SAMIS Technique for Linking Input—Output and Econometric Models

Moghadam and Ballards I-SAMIS (integrated small-area modeling of the industrial sector) approach of linking input—output and econometric models is extended in three ways: (1) the interindustry demand variable (IDV), which incorporates input—output linkages into time-series employment equations, is modified to reflect differences in labor productivity among industries; (2) the IDVs are calculated by using a regional, rather than national, input—output model; and (3) the industry focus is broadened to include nonmanufacturing industries. The paper is concluded by a discussion of the I-SAMIS model constructed for the Louisville metropolitan area.

Using a Metropolitan-area Econometric Model to Analyse Economic Development Proposals

This paper shows how an integrated input-output and econometric model has been developed and used by a municipal government to evaluate economic development proposals. The model simulates the impact of attracting or retaining various types of new businesses and calculates fiscal impacts for state and local governments. It can be used to determine a governments bottom-line tax concession or how much it is witting to give up to attract new businesses into the community. We present examples of proposals evaluated using our Louisville metropolitan-area econometric model and suggest that the methodology is readily adaptable to other urban areas.

Estimating Functional Forms in Cost-Prices

Abstract Klaus Conrad (1983) developed the cost-price approach, based upon the notion of partially fixed factor proportions, as an alternative to the traditional neoclassical method of modeling cost and production functions. He showed that a simplified version of his model could be used to estimate a Cobb-Douglas cost function in cost-prices. We have been able to estimate the full form of Conrads proposed model and extend his technique to the CES and generalized Leontief cost functions. We also illustrate how to model technical change in cost prices and in cost shares.

The Alaska Permanent Fund and Dividend Distribution Program

The Alaska Permanent Fund and its associated dividend distribution program are a unique experiment in the intergenerational transfer of wealth and in the redistribution of public funds back to the private sector. This article provides an historic perspective for the establishment of the Alaska Permanent Fund and presents the economic rationales for the dividend distribution program. We argue that dividends in the form of direct cash payments to state residents made from the interest income of the fund have benefited currentAlaskans through higher personal income, higher employment, and mitigated recesscons. Future generations also may benefit from the dividend distribution program due to its role in reducing fiscal illusion and limiting current state spending.

Do Portuguese private firms follow pecking order financing

This paper tests for pecking order behavior in medium-sized private Portuguese firms. In contrast to the usual split between internal funds, debt, and external equity, we separate debt into four components – cheap trade credits (CTC), bank loans (BL), other loans, and expensive credits (EC). We use breakpoint tests to identify when firms switch between funding sources by examining the change in each funding source based on the financing deficit remaining after the previous pecking order funding source has been used. Our tests indicate that Portuguese companies generally move from lower cost to higher cost financing sources, but they do not exhaust each type of debt before moving on to the next funding source in the pecking order. Such behavior is consistent with a loose interpretation of pecking order financing, but not a strict interpretation of the theory. Instead, Portuguese firms may be balancing pecking order financing with a need to maintain some degree of financing flexibility.

The determinants of loan loss and allowances for MENA banks

Purpose – This study aims to examine the determinants of the allowance for loan losses (ALL) and loan loss provisions (LLP) for banks in the Middle East and North African (MENA) region using both a two-stage approach and simultaneous equation system to address the potential problem of estimation bias introduced by estimating the ALL and LLP separately. The paper also tests three competing hypotheses: the earnings management hypothesis, the capital management hypothesis, and the signaling hypothesis. Design/methodology/approach – The authors adopt a simultaneous equation and three-stage approaches to test whether MENA banks jointly determine LLP and ALL and the determinants of the two accounts. The sample consists of all available electronic data for 75 banks (451 bank-year observations) in nine MENA countries over the period 2000-2008. Findings – Evidence suggests that the two accounts are jointly determined. The results support the earnings management hypothesis – meaning that MENA banks have engaged in ...

The Interregional Incidence of Energy-Production Taxes

A general equilibrium model of international trade with pure intermediate goods is adapted to analyze the interregional incidence of a severance tax. The effects of a small increase in a production tax on an intermediate good are not a priori predictable. In fact, outputs of final goods, factor rewards, and the commodity price ratio can move in either direction. An empirical illustration of the model indicates that energy-producing states may benefit from severance tax increases, but the nation suffers a net loss due to the tax-induced curtailment of energy production.

Using BEA and BLS Data to Monitor Metropolitan Area Economic Performance

Although personal income data for states are available on a timely basis, a comprehensive and timely measure of economic growth for cities does not exist. This paper develops a methodology for estimating current metropolitan area earnings by weighting the BLS metropolitan-area monthly job data by the most recently available BEA industry earnings data. The earnings-weighted job data are then used to construct an economic performance index to compare economic growth among metropolitan areas. To illustrate, we construct the index for the 75 largest U.S. metropolitan areas for the first quarter of 1990. We also examine metropolitan economic growth for the year 1989 and show how our index compares to simple job growth and personal income growth. Finally, earnings-weighted shift-share analysis is developed as a way of further examining the components of growth in a city.