Friday, August 29, 2014

October Reading List

In North America, Labo(u)r Day weekend is upon us. The end of summer. Back to school. Last chance to get some pre-class reading done!

  • Blackburn, M. L., 2014. The relative performance of Poisson and negative binomial regression estimators. Oxford Bulletin of Economics and Statistics, in press.
  • Giannone, D., M. Lenza, and G. E. Primiceri, 2014. Prior selection for vector autoregressions. Review of Economics and Statistics, in press.
  • Gulesserian, S. G. and M. Kejriwal, 2014. On the power of bootstrap tests for stationarity: A Monte Carlo comparison. Empirical Economics, 46, 973-998.
  • Elliot, G. and A. Timmerman, 2008. Economic forecasting. Journal of Economic Literature, 46, 3-56.
  • Kiviet, J. F., 1986, On the rigour of some misspecification tests for modelling dynamic relationships. Review of Economic Studies, 53, 241-261.
  • Otto, G. D. and G. M. Voss, 2014. Flexible inflation forecast targeting: Evidence from Canada. Canadian Journal of Economics, 47, 398-421. 

© 2014, David E. Giles

Tuesday, August 26, 2014

N.Z. Econometrics Study Group, 2015

Thanks to Peter Phillips, the New Zealand Econometric Study Group has been going strong for a quarter of  a century. I last mentioned the group after my participation in the meeting last year - see here

In February of 2015 the NZESG meeting will be going off-shore for the first time, and will be held at the Queensland University of Technology (Australia). In particular, it will be held in collaboration with the National Centre for Econometric Research, about which I've posted previously.

The full details of the upcoming Meeting can be found here. Definitely something to be looking forward to!

© 2014, David E. Giles

Monday, August 25, 2014

On Rockets and Feathers

"Rockets and Feathers" is a term that is often used to describe the (apparent) asymmetric responses of downstream price changes to changes in upstream prices. I believe that the expression was coined by Bacon (1991), and it's been used frequently in the literature in connection with the prices of gasoline and crude oil.

When the price of crude oil falls, does the price of gasoline fall as quickly as it rises when the crude oil price rises? Many studies suggest that the answer is "No". The price goes goes up like a rocket, but it falls like a feather.

There are several explanations for this apparent phenomenon, and a really good analysis of these competing hypotheses is provided by Douglas and Herrera (2010), for example.

This phenomenon was mentioned in my recent post about the paper that I presented at the Joint Statistical Meetings a few weeks ago. Since then, I've received a nice email from Andrea Bastianin, a post-doctoral fellow at the University of Milan. Andrea sent me a paper that he and his co-authors have completed, and that's to appear in Energy Economics.

While dealing with the "Rockets and Feathers" hypothesis in relation to oil and gasoline prices, their paper has an important and novel twist to it- they focus on forecasting performance of models that incorporate asymmetry. Here's the abstract:

Friday, August 22, 2014

The Econometrics of Temporal Aggregation - III - Unit Roots

In two previous posts, I've talked a bit about the effect that aggregating time series data can have on some standard econometric results. The first of those posts was about a talk that I gave last month at the 2014 Conference of the New Zealand Association of Economists. That talk was on the general topic of "The Econometrics of Temporal Aggregation". The second post looked more specifically of the consequences of such aggregation on the results of testing for Granger causality.

Here, I'll provide some information about the impact of temporal aggregation on the existence of, and testing for, unit roots in time-series data.

Thursday, August 21, 2014

Risk Analysis for Three Precious Metals

Qinlu (Louisa) Chen and I have recently completed a paper titled, "Risk Analysis for Three Precious Metals: An Application of Extreme Value Theory". It's based in part on work that Louisa undertook in her B.Sc. Honours program here at UVic.

Here's the abstract:
"Gold, and other precious metals, are among the oldest and most widely held commodities used as a hedge against the risk of disruptions in financial markets. The prices of such metals fluctuate substantially, introducing a risk of its own. This paper’s goal is to analyze the risk of investment in gold, silver, and platinum by applying Extreme Value Theory to historical daily data for changes in their prices. The risk measures adopted in this paper are Value at Risk and Expected Shortfall. Estimates of these measures are obtained by fitting the Generalized Pareto Distribution, using the Peaks‐Over‐Threshold method, to the extreme daily price changes. The robustness of the results to changes in the sample period is discussed. Our results show that silver is the most risky metal among the three considered. For negative daily returns, platinum is riskier than gold; while the converse is true for positive returns."
If you're interested, you can download the full paper here.

© 2014, David E. Giles

Tuesday, August 19, 2014

The Bracken Bower Prize

The Bracken Bower Prize is a new initiative that's intended to motivate younger authors to identify and analyse future business trends. It's an important award that could well be of interest to applied econometricians, so here are the details that were sent to me:

Introducing the Bracken Bower Prize

The Financial Times and McKinsey & Company, organisers of the Business Book of the Year Award, want to encourage young authors to tackle emerging business themes. They hope to unearth new talent and encourage writers to research ideas that could fill future business books of the year. A prize of £15,000 will be given for the best book proposal.

The Bracken Bower Prize is named after Brendan Bracken who was chairman of the FT from 1945 to 1958 and Marvin Bower, managing director of McKinsey from 1950 to 1967, who were instrumental in laying the foundations for the present day success of the two institutions. This prize honours their legacy but also opens a new chapter by encouraging young writers and researchers to identify and analyse the business trends of the future.

The inaugural prize will be awarded to the best proposal for a book about the challenges and opportunities of growth. The main theme of the proposed work should be forward-looking. In the spirit of the Business Book of the Year, the proposed book should aim to provide a compelling and enjoyable insight into future trends in business, economics, finance or management. The judges will favour authors who write with knowledge, creativity, originality and style and whose proposed books promise to break new ground, or examine pressing business challenges in original ways.
Only writers who are under 35 on November 11 2014 (the day the prize will be awarded) are eligible. They can be a published author, but the proposal itself must be original and must not have been previously submitted to a publisher.

The judging panel for 2014 comprises: 
Vindi Banga, partner, Clayton Dubilier & Rice
Lynda Gratton, professor, London Business School
Jorma Ollila, chairman, Royal Dutch Shell and Outokumpu
Dame Gail Rebuck, chair, Penguin Random House, UK

The proposal should be no longer than 5,000 words – an essay or an article that conveys the argument, scope and style of the proposed book – and must include a description of how the finished work would be structured, for example, a list of chapter headings and a short bullet-point description of each chapter. In addition entrants should submit a biography, emphasising why they are qualified to write a book on this topic. The best proposals will be published on

The organisers cannot guarantee publication of any book by the winners or runners-up. The finalists will be invited to the November 11 dinner where the Bracken Bower Prize will be awarded alongside the Business Book of the Year Award, in front of an audience of publishers, agents, authors and business figures. Once the finalists’ entries appear on, authors will be free to solicit or accept offers from publishers. The closing date for entries is 5pm (BST) on September 30th 2014.

© 2014, David E. Giles

David Mimno on "Data Carpentry"

There's a post on David Mimno's blog  today titled, "Data Carpentry".

I like it a lot, because it emphasises just how much effort, time and creativity can be required in order to get one's data in order before we can get on with the fun stuff - estimating models, testing hypotheses, making forecasts, and so on. I know that this was something that I didn't fully appreciate when I was starting my career. And when I did get the message, I found it rather irksome!

However, the message isn't going to change, so we just have to live with it, and accept the realities of working with "real" data.

In his post, David explains why he doesn't like the oft-used term"data cleaning" (which makes us sound like "data janitors"), and why he prefers the term "data carpentry". Certainly, the latter has more constructive overtones.

As he says:
"To me these imply that there is some kind of pure or clean data buried in a thin layer of non-clean data, and that one need only hose the dataset off to reveal the hard porcelain underneath the muck. In reality, the process is more like deciding how to cut into a piece of material, or how much to plane down a surface. It’s not that there’s any real distinction between good and bad, it’s more that some parts are softer or knottier than others. Judgement is critical.
The scale of data work is more like woodworking, as well. Sometimes you may have a whole tree in front of you, and only need a single board. There’s nothing wrong with the rest of it, you just don’t need it right now."
A nice post, and a very nice "take" on a crucial part of the work that we do.

© 2014, David E. Giles

Thursday, August 14, 2014

Early Computing

During a recent visit to Harvard U. I came across this monstrosity thing of beauty in the Science Center - the building where the Dept. of Statistics is housed:

It's an "Aiken-IBM Automatic Sequence Controlled Calculator - I", and dates from 1944. (Obviously, those other people in the picture liked it a lot too - I couldn't get them out of the way! But they do give you a sense of scale.)

From left to right, the main components of the calculator are:
  1. Panel of 60 constants.
  2. Unit of 72 storage counters.
  3. The multiply/divide unit.
  4. Fractional counters.
  5. Interpolators - 1, 2, 3.
  6. Sequence control.
  7. Typewriters (barely visible).
  8. Card feed (out of sight).
  9. Card punch (even more out of sight!).
It's about the size of strech limo, and a great piece of computing history.

It reminded me of "The Monkey Run" - ah, those were the days!

© 2014, David E. Giles

Tuesday, August 12, 2014

The A. R. Bergstrom Prize in Econometrics, 2015

A. R. (Rex) Bergstrom can reasonably be regarded as the "father" of modern econometrics in New Zealand. He made seminal contributions to continuous-time econometrics and the finite-sample properties of simultaneous equations estimators. He also taught and inspired a generation of young econometricians.

You can read Peter Phillips' 1988 "ET Interview" with Rex here.

Rex's contributions are recognized by a biennial award, named in his honour. Applications and nominations for the 11th A. R. Bergstrom Prize are now being solicited:

© 2014, David E. Giles

Monday, August 11, 2014

A Trio of Texts

A Trio of Texts refers to three, free, econometrics e-texts made available by Francis Diebold, at U. Penn. Francis blogs at No Hesitations.

The three books on question are 
  • Econometrics (undergraduate level)
  • Forecasting (upper-level undergraduate/graduate level)
  • Time Series Econometrics (graduate level)
Accompanying slides, data, and code are also available, and the material is updated regularly.

The material is of an extremely high quality, and I strongly recommend all three books.

© 2014, David E. Giles