The Cult of Statistical Significance

This article takes issue with a recent book by Ziliak and McCloskey (2008) of the same title. Ziliak and McCloskey argue that statistical significance testing is a barrier rather than a booster for empirical research in many fields and should therefore be abandoned altogether. The present article argues that this is good advice in some research areas but not in others. Taking all issues which have appeared so far of the German Economic Review and a recent epidemiological meta-analysis as examples, it shows that there has indeed been a lot of misleading work in the context of significance testing, and that at the same time many promising avenues for fruitfully employing statistical significance tests, disregarded by Ziliak and McCloskey, have not been used.significance testing

Long Memory with Markov-Switching GARCH

The paper considers the Markov-Switching GARCH(1,1)-model with time-varying transition probabilities. It derives sufficient conditions for the square of the process to display long memory and provides some additional intuition for the empirical observation that estimated GARCH-parameters often sum to almost one.Markov switching, GARCH, long memory

"True Believers" or Numerical Terrorism at the Nuclear Power Plant

For decades, there has been a heated debate about whether or not nuclear power plants contribute to childhood cancer in their respective neighbourhoods, with statisticians testifying on both sides. The present paper points to some flaws in the pro-arguments, taking a recent study prepared for the political party "Bündnis 90 / Grüne" as a specimen. Typical mistakes include an understatement of the size of tests of significance, disregard of important covariates and extreme reliance on very few selected data points.

Large-Scale Disasters and the Insurance Industry

We investigate the impact of the 20 largest – in terms of insured losses – man-made or natural disasters on various insurance industry stock indices. We show via an event study that insurance sectors worldwide are quite resilient, in a market–value sense, to unexpected losses to capital: our data provide evidence that equity market investors believe that insurance companies will on average be able to make losses back over the foreseeable future, i.e. that the adverse shocks to equity which have resulted from these catastrophes will be compensated by either an outward shift of the demand curve or an ability to raise premiums, or both.disaster, insurance industry, event-study

On Comparing the Accuracy of Default Predictions in the Rating Industry

We consider 1927 borrowers from 54 countries who had a credit rating by both Moody's and S&P at the end of 1998, and their subsequent default history up to the end of 2002. Viewing bond ratings as predicted probabilities of default, we consider partial orderings among competing probability forecasters and show that Moody's and S&P cannot be ordered according to any of these. Therefore, the relative performance of the agencies depends crucially on the way in which probability predictions are compared.credit rating, probability forecasts, calibration

Efficiency, Equity, and Generalized Lorenz Dominance

We decompose the generalized Lorenz order into a size and a distribution component. The former is represented by stochastic dominance, the latter by the standard Lorenz order. We show that it is always possible, given generalized Lorenz dominance between two distributions F and G, to find distributions H1 and H2 such that F stochastically dominates H1 and H1 Lorenz-dominates G, and such that F Lorenz-dominates H2 and H2 stochastically dominates G. We also show that generalized Lorenz dominance is characterized by this property and discuss the implications of these results for choice under risk.Income distribution, welfare dominance, Lorenz order, stochastic dominance, decisions under risk

Complex X-ray Absorption and the Fe Kalpha Profile in NGC 3516

We present data from simultaneous Chandra, XMM-Newton and BeppoSAX observations of the Seyfert 1 galaxy NGC 3516, taken during 2001 April and Nov. We have investigated the nature of the very flat observed X-ray spectrum. Chandra grating data show the presence of X-ray absorption lines, revealing two distinct components of the absorbing gas, one which is consistent with our previous model of the UV/X-ray absorber while the other, which is outflowing at a velocity of ~1100 km/s has a larger column density and is much more highly ionized. The broad-band spectral characteristics of the X-ray continuum observed with XMM during 2001 April, reveal the presence of a third layer of absorption consisting of a very large column (~2.5 x 10E23 cm^-2) of highly ionized gas with a covering fraction ~50%. This low covering fraction suggests that the absorber lies within a few lt-days of the X-ray source and/or is filamentary in structure. Interestingly, these absorbers are not in thermal equilibrium with one another. The two new components are too highly ionized to be radiatively accelerated, which we suggest is evidence for a hydromagnetic origin for the outflow. Applying our model to the Nov dataset, we can account for the spectral variability primarily by a drop in the ionization states of the absorbers, as expected by the change in the continuum flux. When this complex absorption is accounted for we find the underlying continuum to be typical of Seyfert 1 galaxies. The spectral curvature attributed to the high column absorber, in turn, reduces estimates of the flux and extent of any broad Fe emission line from the accretion disk.Comment: 33 pages, 9 figures, accepted for publication in Ap

Multiband Wavelet Age Modeling for a ∼293 m (∼600 kyr) Sediment Core From Chew Bahir Basin, Southern Ethiopian Rift

The use of cyclostratigraphy to reconstruct the timing of deposition of lacustrine deposits requires sophisticated tuning techniques that can accommodate continuous long-term changes in sedimentation rates. However, most tuning methods use stationary filters that are unable to take into account such long-term variations in accumulation rates. To overcome this problem we present herein a new multiband wavelet age modeling (MUBAWA) technique that is particularly suitable for such situations and demonstrate its use on a 293 m composite core from the Chew Bahir basin, southern Ethiopian rift. In contrast to traditional tuning methods, which use a single, defined bandpass filter, the new method uses an adaptive bandpass filter that adapts to changes in continuous spatial frequency evolution paths in a wavelet power spectrum, within which the wavelength varies considerably along the length of the core due to continuous changes in long-term sedimentation rates. We first applied the MUBAWA technique to a synthetic data set before then using it to establish an age model for the approximately 293 m long composite core from the Chew Bahir basin. For this we used the 2nd principal component of color reflectance values from the sediment, which showed distinct cycles with wavelengths of 10–15 and of ∼40 m that were probably a result of the influence of orbital cycles. We used six independent 40Ar/39Ar ages from volcanic ash layers within the core to determine an approximate spatial frequency range for the orbital signal. Our results demonstrate that the new wavelet-based age modeling technique can significantly increase the accuracy of tuned age models