Price probabilities: A class of Bayesian and non-Bayesian prediction rules

This paper examines the implications of the market selection hypothesis on the accuracy of the probabilities implied by equilibrium prices and on the “learning” mechanism of markets. I use the standard machinery of dynamic general equilibrium models to generate a rich class of probabilities, price probabilities, and discuss their properties. This class includes the Bayes’ rule and known non-Bayesian rules. If the prior support is well-specified, I prove that all members of this class perform as well as Bayes’ rule in terms of likelihood. If the prior support is misspecified in that the Bayesian prior does not converge, I demonstrate that some members of price probabilities significantly outperform Bayes’. Because these members are never worse and sometimes better than Bayes, my result challenges the prevailing opinion that Bayes’ rule is the only rational way to learn

Evaluation of appendicitis risk prediction models in adults with suspected appendicitis

Background Appendicitis is the most common general surgical emergency worldwide, but its diagnosis remains challenging. The aim of this study was to determine whether existing risk prediction models can reliably identify patients presenting to hospital in the UK with acute right iliac fossa (RIF) pain who are at low risk of appendicitis. Methods A systematic search was completed to identify all existing appendicitis risk prediction models. Models were validated using UK data from an international prospective cohort study that captured consecutive patients aged 16–45 years presenting to hospital with acute RIF in March to June 2017. The main outcome was best achievable model specificity (proportion of patients who did not have appendicitis correctly classified as low risk) whilst maintaining a failure rate below 5 per cent (proportion of patients identified as low risk who actually had appendicitis). Results Some 5345 patients across 154 UK hospitals were identified, of which two‐thirds (3613 of 5345, 67·6 per cent) were women. Women were more than twice as likely to undergo surgery with removal of a histologically normal appendix (272 of 964, 28·2 per cent) than men (120 of 993, 12·1 per cent) (relative risk 2·33, 95 per cent c.i. 1·92 to 2·84; P < 0·001). Of 15 validated risk prediction models, the Adult Appendicitis Score performed best (cut‐off score 8 or less, specificity 63·1 per cent, failure rate 3·7 per cent). The Appendicitis Inflammatory Response Score performed best for men (cut‐off score 2 or less, specificity 24·7 per cent, failure rate 2·4 per cent). Conclusion Women in the UK had a disproportionate risk of admission without surgical intervention and had high rates of normal appendicectomy. Risk prediction models to support shared decision‐making by identifying adults in the UK at low risk of appendicitis were identified

The within-distribution business cycle dynamics of German firms

In this article, we analyse stylized facts for Germany's business cycle at the firm level. Based on longitudinal firm-level data from the Bundesbank's balance sheet statistics covering, on average, 55 000 firms per year from 1971 to 1998, we estimate transition probabilities of a firm in a certain real sales growth regime switching to another regime in the next period, e.g. whether a firm that has witnessed a high growth rate is likely to stay in a regime of high growth or is bound to switch to a regime of low growth in the subsequent period. We find that these probabilities depend on the business cycle position.

Issuers’ incentives and tests of Baron’s model of IPO underpricing

Initial public offering, Incentives, Underwriter, G32,