Equivalence Between Out‐of‐Sample Forecast Comparisons and Wald Statistics

We demonstrate the asymptotic equivalence between commonly used test statistics for out‐of‐sample forecasting performance and conventional Wald statistics. This equivalence greatly simplifies the computational burden of calculating recursive out‐of‐sample test statistics and their critical values. For the case with nested models, we show that the limit distribution, which has previously been expressed through stochastic integrals, has a simple representation in terms of χ²‐distributed random variables and we derive its density. We also generalize the limit theory to cover local alternatives and characterize the power properties of the test.     

Methodology and finance

The relationship between science and methodology (philosophy of science) is reciprocal. Methodological concepts can be used to describe, to evaluate, and even to guide scientific activity. In discussing philosophy of science, real-life science can be used to clarify, to illustrate, and even to evaluate competing methodological positions. This paper analyzes the reciprocal relationship between methodology and financial economics.Two different philosophical positions are presented, contrasted, and related to two different branches of financial economics. Capital market theory is tentatively evaluated on the basis of both positions. The evaluation shows that - and why - capital market theory can be considered as a successful research programme. As a methodological case study it also demonstrates that - and why - traditional methodological concepts are largely inappropriate to finance. The alternative methodological position presented in the paper is found to be better suited.These results are then used to investigate whether methodological arguments imply that a behavioral approach to business finance should be preferred rather than an economic approach. The traditional methodological position rejected in this paper does support a behavioural approach, while the position favored in the paper does not.     

On the estimation of parameters,survival functions,and hazard rates based on fuzzy life time data

Life time data analysis is regarded as one of the significant out-shoots of statistics. Classical statistical techniques reckon life time observations as precise numbers and solely cover variation among the observations. In fact, there are two types of uncertainty in data: variation among the observations and the fuzziness. To this effect, the analysis techniques, which do not consider fuzziness and are only based on precise life time observations, use incomplete information; hence lead to pseudo results. This study aimed at generalizing parameters estimation, survival functions, and hazard rates for fuzzy life time data.     

The chain store paradox

The chain store game is a simple game in extensive form which produces an inconsistency between game theoretical reasoning and plausible human behavior. Well-informed players must be expected to disobey game theoretical recommendations.The chain store paradox throws new light on the well-known difficulties arising in connection with finite repetitions of the prisoners dilemma game. Whereas these difficulties can be resolved by the assumption of secondary utilities arising in the course of playing the game, a similar approach to the chain store paradox is less satisfactory.It is argued that the explanation of the paradox requires a limited rationality view of human decision behavior. For this purpose a three-level theory of decision making is developed, where decisions can be made on different levels of rationality. This theory explains why insight into the rational solution of a decision problem does not necessarily mean that the corresponding course of action will be taken.     

The blocking job shop with rail-bound transportation

The blocking job shop with rail-bound transportation (BJS-RT) considered here is a version of the job shop scheduling problem characterized by the absence of buffers and the use of a rail-bound transportation system. The jobs are processed on machines and are transported from one machine to the next by mobile devices (called robots) that move on a single rail. The robots cannot pass each other, must maintain a minimum distance from each other, but can also “move out of the way”. The objective of the BJS-RT is to determine for each machining operation its starting time and for each transport operation its assigned robot and starting time, as well as the trajectory of each robot, in order to minimize the makespan. Building on previous work of the authors on the flexible blocking job shop and an analysis of the feasible trajectory problem, a formulation of the BJS-RT in a disjunctive graph is derived. Based on the framework of job insertion in this graph, a local search heuristic generating consistently feasible neighbor solutions is proposed. Computational results are presented, supporting the value of the approach.     

Discussion of ‘An analysis of global warming in the Alpine region based on nonlinear nonstationary time series models’ by Battaglia and Protopapas

This discussion focuses on threshold nonstationary?Cnonlinear time series modelling; it raises various issues to do with identifiability and model complexity. It also gives some background history concerning smooth threshold/transition autoregressive models and hidden Markov switching models.