Further experience in Bayesian analysis using Monte Carlo Integration

An earlier paper [Kloek and Van Dijk (1978)] is extended in three ways. First, Monte Carlo integration is performed in a nine-dimensional parameter space of Klein's model I [Klein (1950)]. Second, Monte Carlo is used as a tool for the elicitation of a uniform prior on a finite region by making use of several types of prior information. Third, special attention is given to procedures for the construction of importance functions which make use of nonlinear optimization methods. *1 This paper started as a revision of Van Dijk and Kloek (1978). In the course of the work our ideas developed to such an extent that the final result is an almost completely new paper. We are indebted to a referee for a number of very useful suggestions. We also wish to thank A.S. Louter and G. den Broeder of the Econometric Institute for their help in preparing the necessary computer programs

Bayesian estimates of equation system parameters, An application of integration by Monte Carlo

Monte Carlo (MC) is used to draw parameter values from a distribution defined on the structural parameter space of an equation system. Making use of the prior density, the likelihood, and Bayes' Theorem it is possible to estimate posterior moments of both structural and reduced form parameters. The MC method allows a rather liberal choice of prior distributions. The number of elementary operations to be preformed need not be an explosive function of the number of parameters involved. The method overcomes some existing difficulties of applying Bayesian methods to medium size models. The method is applied to a small scale macro model. The prior information used stems from considerations regarding short and long run behavior of the model and form extraneous observations on empirical long term ratios of economic variables. Likelihood contours for several parameter combinations are plotted, and some marginal posterior densities are assessed by MC

Efficient estimation of income distribution parameters

The parameters of several families of distributions are estimated by means of minimum χ2; use is made of random samples taken from Dutch income-earning groups in 1973. The numerical search routine used, is the Complex method due to Box. The χ2 function is evaluated by standard numerical integration procedures. The lognormal and the Gamma families are rejected because of a poor fit. The log t and the log Pearson IV families are introduced. This results in a considerable improvement of χ2 critical levels. The generalized Gamma and the Champernowne function describe the income distribution reasonably well in some cases

Vijftig jaar Econometrie: de waarde van het model

Een halve eeuw geleden werd in Rotterdam het Econometrisch Instituut opgericht. Naar aanleiding van dit jubileum kijken we naar hoe het gebruik van modellen in de econometrie is geevolueerd

Stock Selection, Style Rotation, and Risk

Using US data from June 1984 to July 1999, we show that the impact of firm-specific characteristics like size and book-to-price on future excess stock returns varies considerably over time. The impact can be either positive or negative at different times. This time variation is partially predictable. We investigate whether the partial predictability signals security mispricing or risk compensation by formulating alternative modeling strategies. The strategies are compared empirically, In particular, we allow for a state-dependent choice of investment styles rather than a once-and-for-all choice for a particular style, for example based on high book-to-price ratios or small market cap values. Using alternative ways to correct for risk, we find significant and robust excess returns to style rotating investment strategies. Business cycle oriented approaches exhibit the best overall performance. Purely statistical models for style rotation or fixed investment styles reveal less robust behavior

La construction et l'estimation de petits modèles macro-économiques

Konstruktion und Schätzung kleiner makroökonomischer Modelle, von Teun Kloek. In diesem Artikel werden einige der jiingsten Entwicklungen bei der Konstruktion und Schätzung kleiner makroökonomischer Modelle erörtert, wie die Vereinfachung von VAR-Modellen und deren Umwandlung in ökonometrische Modelle, die Tests der Invarianz der Parameter von Stmkturgleichungen und der Lucas-Kritik, die Beziehungen zwischen der Wirtschaftstheorie und den empirischen Arbeiten, die Wahl der zu testenden Spezifikationen. Dièse Ansätze sind wichtig, um den für Prognosen und wirtschaftspolitische Untersuchungen verwandten Modellen ein Höchstmaß an Zuverlässigkeit zu verleihen.Building and Testing Small Macroeconomic Models, byTeunKIoek. This article discusses some of the recent developments in building and estimating small macroeconomic models: simplifying and converting VAR models into econometric models; tests on the invariance of structural equation parameters and on the Lucas critique; relationships between economic theory and empirical work; and the choice of the specifications tested. These approaches are important in making the models used for economic policy forecasting and studies as sound as possible.La construction et l'estimation de petits modèles macro-économiques, par Teun Kloek. Cet article discute certains développements récents de la construction et de l'estimation de petits modèles macro-économiques : simplification et transformation de modèles VAR en modèles économétriques, tests de l'invariance des paramètres d'équations structurelles et de la critique de Lucas, relations entre la théorie économique et les travaux empiriques, choix des spécifications testées. Ces approches sont importantes pour conférer aux modèles utilisés pour la prévision et les études de politique économique les meilleures caractéristiques de robustesse.La construcción y la evaluación de pequeños modelos macroeconómicos, por Teun Kloek. En este artículo se cuestionan ciertos desarrollos recientes de la construcción y la evaluación de pequeños modelos macroeconómicos : simplificación y transformación de modelos VAR en modelos econométricos, pruebas de invariancia de los parámetros de ecuaciones estructurales y de la crítica de Lucas, relaciones entre la teoria económica y los trabajos empíricos, elección de las especificaciones ensayadas. Estos planteamientos resultan importantes para conferir las mejores características de solidez a los modelos utilizados para la previsión y los estudios de política económica.Kloek Teun. La construction et l'estimation de petits modèles macro-économiques. In: Économie & prévision, n°106, 1992-5. Développements récents de la macro-économie. pp. 51-59