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on Computational Economics |
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Issue of 2010‒02‒27
fifteen papers chosen by |
| By: | Ryo Adachi; Akimichi Takemura |
| Abstract: | In this paper we propose an investing strategy based on neural network models combined with ideas from game-theoretic probability of Shafer and Vovk. Our proposed strategy uses parameter values of a neural network with the best performance until the previous round (trading day) for deciding the investment in the current round. We compare performance of our proposed strategy with various strategies including a strategy based on supervised neural network models and show that our procedure is competitive with other strategies. |
| Date: | 2010–02 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:1002.2265&r=cmp |
| By: | Eckhard Platen (School of Finance and Economics, University of Technology, Sydney); Renata Rendek (School of Finance and Economics, University of Technology, Sydney) |
| Abstract: | In this paper we analyze the simulated behavior of diversi?ed portfolios in a continuous ?nancial market. In particular, we focus on equally weighted portfolios. Wei llustrate that these well diversi?ed portfolios constitute good proxies of the growth optimal portfolio. The multi-asset market models considered include the Black-Scholes model, the Heston model, the ARCH diffusio nmodel, the geometric Ornstein-Uhlenbeck volatility model and the multi-currency minimal market model. The choice of these models was motivated by the fact that they can be simulated almost exactly and, therefore, very accurately also over longer periods of time. Finally, we provide examples, which demonstrate the robustness of the diversi?cation phenomenon when approximating the growth optimal portfolio of a market by an equal value weighted portfolio. Signi?cant outperformance of the market capitalization weighted portfolio by the equal value weightedp ortfolio can be observed for models. |
| Keywords: | growth optimal portfolio; diversi?cation Theorem; diversi?ed portfolios; equally weighted portfolio; exact simulation |
| Date: | 2009–12–01 |
| URL: | http://d.repec.org/n?u=RePEc:uts:rpaper:264&r=cmp |
| By: | Mazilescu, Vasile |
| Abstract: | The knowledge management systems based on artificial reasoning (KMAR) tries to provide computers the capabilities of performing various intelligent tasks for which their human users resort to their knowledge and collective intelligence. There is a need for incorporating aspects of time and imprecision into knowledge management systems, considering appropriate semantic foundations. The aim of this paper is to present the FRTES, a real-time fuzzy expert system, embedded in a knowledge management system. Our expert system is a special possibilistic expert system, developed in order to focus on fuzzy knowledge. |
| Keywords: | Knowledge Management; Artificial Reasoning; predictability |
| JEL: | C63 C88 |
| Date: | 2010–02–17 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:20758&r=cmp |
| By: | J. Wiesinger; D. Sornette; J. Satinover |
| Abstract: | Using virtual stock markets with artificial interacting software investors, aka agent-based models (ABMs), we present a method to reverse engineer real-world financial time series. We model financial markets as made of a large number of interacting boundedly rational agents. By optimizing the similarity between the actual data and that generated by the reconstructed virtual stock market, we obtain parameters and strategies, which reveal some of the inner workings of the target stock market. We validate our approach by out-of-sample predictions of directional moves of the Nasdaq Composite Index. |
| Date: | 2010–02 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:1002.2171&r=cmp |
| By: | Glady, Nicolas; Baesens, Bart; Croux, Christophe |
| Abstract: | The definition and modeling of customer loyalty have been central issues in customer relationship management since many years. Recent papers propose solutions to detect customers that are becoming less loyal, also called churners. The churner status is then defined as a function of the volume of commercial transactions. In the context of a Belgian retail financial service company, our first contribution is to redefine the notion of customer loyalty by considering it from a customer-centric viewpoint instead of a productcentric one. We hereby use the customer lifetime value (CLV) defined as the discounted value of future marginal earnings, based on the customer's activity. Hence, a churner is defined as someone whose CLV, thus the related marginal profit, is decreasing. As a second contribution, the loss incurred by the CLV decrease is used to appraise the cost to misclassify a customer by introducing a new loss function. In the empirical study, we compare the accuracy of various classification techniques commonly used in the domain of churn prediction, including two cost-sensitive classifiers. Our final conclusion is that since profit is what really matters in a commercial environment, standard statistical accuracy measures for prediction need to be revised and a more profit oriented focus may be desirable. |
| Keywords: | Data mining; Decision support systems; Marketing; Churn prediction; |
| Date: | 2009–08 |
| URL: | http://d.repec.org/n?u=RePEc:ner:leuven:urn:hdl:123456789/201349&r=cmp |
| By: | Philip Maymin |
| Abstract: | A deterministic trading strategy by a representative investor on a single market asset, which generates complex and realistic returns with its first four moments similar to the empirical values of European stock indices, is used to simulate the effects of financial regulation that either pricks bubbles, props up crashes, or both. The results suggest that regulation makes the market process appear more Gaussian and less complex, with the difference more pronounced for more frequent intervention, though particular periods can be worse than the non-regulated version, and that pricking bubbles and propping up crashes are not symmetrical. |
| Date: | 2010–02 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:1002.2281&r=cmp |
| By: | Luc Savard (Professeur, GREDI, Département d’économique, Faculté d’administration, Université de Sherbrooke, Sherbrooke, Québec, Canada) |
| Abstract: | In this paper, we explore the contribution of introducing a flexible form for household consumption in a macro-micro modelling context for poverty and income distribution analysis. The almost ideal demand system exhibits interesting features allowing for the introduction of inter-household heterogeneity in a rigorous fashion. In order to illustrate the contribution of the AIDS system in the macro-micro modelling context, we perform a comparative analysis with an equivalent model using a LES demand system and a CGE with representative households including an AIDS. Results show the strong contribution of using an almost ideal demand system in a microsimulation context and its value added versus a linear expenditure system to analyse poverty and income distribution changes following a policy simulation. |
| Keywords: | Computable General Equilibrium Models, Estimation, Personal Income and Wealth Distribution, Measurement and Analysis of Poverty |
| JEL: | I32 D31 C13 C68 |
| Date: | 2010–02–04 |
| URL: | http://d.repec.org/n?u=RePEc:shr:wpaper:10-04&r=cmp |
| By: | Pauw, Karl; Thurlow, James |
| Abstract: | Rapid economic growth has failed to significantly improve poverty and nutrition outcomes in Tanzania. This raises concerns over a decoupling of growth, poverty, and nutrition. We link recent production trends to household incomes using a regionalized, dynamic computable general equilibrium and microsimulation model. Results indicate that the structure of economic growth—not the level—is currently constraining the rate of poverty reduction in Tanzania. Most importantly, agricultural growth trends have been driven by larger-scale farmers and by crops grown in only a few regions of the country. The slow expansion of food crops and livestock also explains the weak relationship between agricultural growth and nutrition outcomes. Additional model simulations find that accelerating agricultural growth, particularly in maize, greatly strengthens the growth–poverty relationship and enhances households' caloric availability. We conclude that low productivity, market constraints (including downstream agroprocessing), and barriers to import substitution for major food crops are among the more binding constraints to reducing poverty and improving nutrition in Tanzania. |
| Keywords: | economic growth, Poverty, Nutrition, household incomes, Computable general equilibrium (CGE) modeling, Agricultural growth, Microsimulation model, livestock, Food crops, low productivity, market constraints, Development strategies, |
| Date: | 2010 |
| URL: | http://d.repec.org/n?u=RePEc:fpr:ifprid:947&r=cmp |
| By: | Bouet, Antoine; Mevel, Simon; Thomas, Marcelle |
| Abstract: | The Agreement on South Asian Free Trade Area (SAFTA) entered its second phase of implementation in 2008. The creation of a free trade area is expected to affect its participants—Bangladesh, Bhutan, India, the Maldives, Nepal, Pakistan, and Sri Lanka—very differently given their diversity in terms of size, income, and structure of trade and protection. Using the 2004 MAcMapHS6-v2 database on measures of applied protection at the HS6 level and MIRAGE, a computable general equilibrium global model, this study examines the effects of SAFTA on trade and net income in the region. The magnitude of the effects will depend on initial levels of protection in the region and whether the agreement is trade diverting or trade creating. An important component of the SAFTA agreement is the exemption of products (sensitive list) from the trade liberalization process. Because such exclusion can restrict significantly the benefits from the regional trade agreement, we simulate the effects of SAFTA with and without sensitive products. Our findings show that among South Asian countries, Sri Lanka gains the most from the agreement because it initially has relatively low tariffs and faces high tariffs in the region. Exempting sensitive products from the agreement limits gains from trade for the lower-middle-income members of SAFTA but may be welfare enhancing for the least developed economies. |
| Keywords: | South Asian Free Trade Area (SAFTA), trade liberalization, Computable General Equilibrium (CGE) model, welfare, trade, applied protection, income, FTA, Markets, Globalization, |
| Date: | 2010 |
| URL: | http://d.repec.org/n?u=RePEc:fpr:ifprid:950&r=cmp |
| By: | Thurlow, James |
| Abstract: | Kenya is vulnerable to avian flu given its position along migratory bird routes and proximity to other high-risk countries. This raises concerns about the effect an outbreak could have on economic development. We use a dynamic computable general equilibrium model of Kenya to simulate potential outbreaks of different severities, durations, and geographic spreads. Results indicate that even a severe outbreak does not greatly reduce economic growth. It does, however, significantly worsen poverty, because poultry is an important income source for poor farmers and a major food item in consumers' baskets. Avian flu therefore does pose a threat to future development in Kenya. Reducing the duration and geographic spread of an outbreak is found to substantially lower economic losses. However, losses are still incurred when poultry demand falls, even without a confirmed outbreak but only the threat of an outbreak. Our findings support monitoring poultry production and trade, responding rapidly to possible infections, and improving both farmers' and consumers' awareness of avian flu. |
| Keywords: | Avian influenza Developing countries, avian flu, economic growth, Poverty, Computable General Equilibrium (CGE) model, Development strategies, |
| Date: | 2010 |
| URL: | http://d.repec.org/n?u=RePEc:fpr:ifprid:951&r=cmp |
| By: | Luc Savard (Professeur, GREDI, Département d’économique, Faculté d’administration, Université de Sherbrooke, Sherbrooke, Québec, Canada) |
| Abstract: | In this paper we use a top-down bottom up microsimulation CGE model with endogenous labour supply to explore the impact of scaling up infrastructure in the Philippines. As the debate on the importance of scaling up infrastructure to stimulate growth and provide a push to growth, some analyst raise concern on financing these infrastructures after construction and that external funding can create major distortion and have a negative impact on the trade balance of these countries and adverse effect on poverty. This study aims to provide so insight into this debate. It draws from the infrastructure productivity literature to postulate positive productive externalities of new infrastructure and Fay and Yepes (2003) for operating cost associated with new infrastructure. We investigate on types fiscal tools to fund the new infrastructure and operation and maintenance costs. We compare our simulations to non productive investments. |
| Keywords: | Investment externalities, foreign aid, fiscal reforms, poverty, CGE, microsimulation |
| JEL: | C68 E62 F35 H54 |
| Date: | 2010–02–15 |
| URL: | http://d.repec.org/n?u=RePEc:shr:wpaper:10-06&r=cmp |
| By: | Davies, Rob; Thurlow, James |
| Abstract: | South Africa's high involuntary unemployment and small informal sector are attributed to an underperforming formal sector and barriers to entry in the informal sector. This paper examines the economywide linkages between the formal and informal economies while accounting for different types of informal activities. A multiregion empirically calibrated general equilibrium model is developed capturing both product and labor markets. Three policy options are considered. First, results indicate that trade liberalization reduces national employment. At the same time, it increases formal employment, hurts informal producers, and favors informal traders, who benefit from lower import prices. Past liberalization may, therefore, partly explain South Africa's small informal sector and its concentration among traders rather than producers. Second, wage subsidies on low-skilled formal workers increase national employment but hurt informal producers by heightening competition in domestic product markets. This suggests that it is insufficient to examine unemployment policies by focusing only on labor markets. Third, unconditional cash transfers stimulate demand for informally produced products, thereby raising informal employment without undermining formal producers. The transfer does, however, place a large fiscal burden on the state and is less effective at reducing national unemployment than a wage subsidy. Overall, these findings underline the importance of distinguishing between the formal and informal sector implications of socioeconomic policies. |
| Keywords: | informal economy, involuntary unemployment, formal economy, labor markets, trade liberalization, national employment, Cash transfers, wage subsidy, Computable general equilibrium (CGE) modeling, Development strategies, |
| Date: | 2009 |
| URL: | http://d.repec.org/n?u=RePEc:fpr:ifprid:943&r=cmp |
| By: | Thomas S. Lontzek; Daiju Narita |
| Abstract: | Degradation of ecosystem services may be a major component of climate change damage, and incorporation of this factor could significantly alter the significance of uncertainty in climate-economy modeling. However, this aspect has been little investigated by economic analyses of climate change and uncertainty. We apply standardized numerical techniques of stochastic optimization to this research question. The model results show that the effects of uncertainty are different with different levels of agent’s risk aversion. Also, uncertainty exhibits different effects on mitigation policy and capital investment according to the availability of ecosystem services. Importantly, both the risk aversion and the availability of ecosystem services can change the effects of uncertainty on mitigation not only in level but also in sign. In other words, mitigation could both increase and decrease with climatic uncertainty. The model would provide hints for policymaking in finding a balance between economic growth, climate protection, and the conservation of ecosystems |
| Keywords: | climate change, decision making under uncertainty, stochastic control, renewable resource, ecosystem services |
| JEL: | C63 Q54 D81 |
| Date: | 2010–01 |
| URL: | http://d.repec.org/n?u=RePEc:kie:kieliw:1593&r=cmp |
| By: | Strid, Ingvar (Dept. of Economic Statistics, Stockholm School of Economics); Giordani, Paolo (Research division, Sveriges Riksbank); Kohn, Robert (Australian School of Business, University of New South Wales) |
| Abstract: | Bayesian inference for DSGE models is typically carried out by single block random walk Metropolis, involving very high computing costs. This paper combines two features, adaptive independent Metropolis-Hastings and parallelisation, to achieve large computational gains in DSGE model estimation. The history of the draws is used to continuously improve a t-copula proposal distribution, and an adaptive random walk step is inserted at predetermined intervals to escape difficult points. In linear estimation applications to a medium scale (23 parameters) and a large scale (51 parameters) DSGE model, the computing time per independent draw is reduced by 85% and 65-75% respectively. In a stylised nonlinear estimation example (13 parameters) the reduction is 80%. The sampler is also better suited to parallelisation than random walk Metropolis or blocking strategies, so that the effective computational gains, i.e. the reduction in wall-clock time per independent equivalent draw, can potentially be much larger. |
| Keywords: | Markov Chain Monte Carlo (MCMC); Adaptive Metropolis-Hastings; Parallel algorithm; DSGE model; Copula |
| JEL: | C11 C63 |
| Date: | 2010–02–14 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:hastef:0724&r=cmp |
| By: | Barr, Jason; Saraceno, Francesco (Centre de recherche en économie de Sciences Po) |
| Abstract: | This paper models the organization of the firm as a type of artificial neural network in a duopoly setting. The firm plays a repeated Prisoner’s Dilemma type game, and must also learn to map environmental signals to demand parameters and to its rival’s willingness to cooperate. We study the prospects for cooperation given the need for the firm to learn the environment and its rival’s output. We show how profit and cooperation rates are affected by the sizes of both firms, their willingness to cooperate, and by environmental complexity. In addition, we investigate equilibrium firm size and cooperation rates. |
| Keywords: | Artificial neural networks;; Prisoner’s Dilemma;; Cooperation;; Firm learning; |
| JEL: | C63 C72 D21 D83 L13 |
| Date: | 2009–05 |
| URL: | http://d.repec.org/n?u=RePEc:ner:sciepo:info:hdl:2441/9832&r=cmp |