intertemporal pricing and price discrimination a semiparametric hedonic analysis of the personal computer market we apply a smooth coefficient semiparametric model to a unique high frequency data set to examine the intertemporal pricing of personal computers furthermore we test whether firms charge differential component prices for their top performance personal computers and whether premium firms charge both a premium for all their computers and a premium for their top performance ones we find nonlinear effects in the pricing of personal computer components we also find that firms in general do not charge differential prices for the components of their top performance computers in addition high quality firms charge higher premia only for their most advanced products copyright 2006 john wiley sons ltd

gasoline price volatility and the elasticity of demand for gasoline abstract we examine how gasoline price volatility impacts consumers price elasticity of demand for gasoline results show that volatility in prices decreases consumer demand for gasoline in the intermediate run we also find that consumers appear to be less elastic in response to changes in gasoline price when gasoline price volatility is medium or high compared to when it is low moreover we find that when we control for variance in our econometric model gasoline price elasticity of demand is lower in magnitude in the long run

a comparative study of modelling the demand for food in the united states and the netherlands this paper provides time series and cross sectional budget survey analyses of the demand for food in the united states and the netherlands according to the tasks set by jan magnus and mary morgan mm various econometric methods including weighted least squares wls cointegration error correction the almost ideal demand system aids and time varying parameter tvp techniques are used and the estimated demand elasticities compared across country and over time 1997 john wiley sons ltd

a comparative analysis of current credit risk models the new bis 1998 capital requirements for market risks allows banks to use internal models to assess regulatory capital related to both general market risk and credit risk for their trading book this paper reviews the current proposed industry sponsored credit value at risk methodologies first the credit migration approach as proposed by jp morgan with creditmetrics is based on the probability of moving from one credit quality to another including default within a given time horizon second the option pricing or structural approach as initiated by kmv and which is based on the asset value model originally proposed by merton merton r 1974 journal of finance 28 449 470 in this model the default process is endogenous and relates to the capital structure of the firm default occurs when the value of the firm s assets falls below some critical level third the actuarial approach as proposed by credit suisse financial products csfp with creditrisk and which only focuses on default default for individual bonds or loans is assumed to follow an exogenous poisson process finally mckinsey proposes creditportfolioview which is a discrete time multi period model where default probabilities are conditional on the macro variables like unemployment the level of interest rates the growth rate in the economy which to a large extent drive the credit cycle in the economy 2000 elsevier science b v all rights reserved

demand for gasoline in kuwait an empirical analysis using cointegration techniques abstract this paper estimates the demand for gasoline in kuwait for the period 1970 1989 using a cointegration and error correction model ecm it is found that gasoline demand is inelastic with respect to price in the short and long run and while it is elastic in the long run gasoline demand is inelastic with respect to income in the short run this suggests that gasoline demand response to income changes is higher in the long run than in the short run furthermore gasoline consumption adjusts towards its long run level with about 52 of the adjustment occurring in the first year

a cointegration analysis of gasoline demand in the united states time series estimation of gasoline demand elasticities often does not take into account the possibility of nonstationarity in the underlying data which may render the parameter estimates spurious studies have shown that the time trending variables used to explain gasoline demand could be difference stationary and therefore may require cointegration analysis to assess the relationship among the trending variables in this work we use the cointegration technique to derive long run and short run demand elasticities of noncommercial gasoline consumption using time series data for the usa from 1949 to 2004 we also attempt to incorporate the presence of a structural break in the data generation process of the time trending variables our results show that the consumption of gasoline and lifetime income have a long term stable relationship after the second oil shock of 1978 prior to the first oil shock of 1973 no such long run relationship could be established through cointegration

how do sales efforts pay off dynamic panel data analysis in the nerlove arrow framework this paper evaluates the short and long term value of sales representatives detailing visits to different types of physicians by understanding the dynamic effect of sales calls across heterogene

empirical implications of alternative models of firm dynamics abstract this paper considers two models of firm behavior that allow for heterogeneity among firms idiosyncratic or firm specific sources of uncertainty and discrete outcomes exit and or entry both the characteristics of firm level panel data sets and the nature of the questions we characteristically ask of them imply that models with these features are likely to underlie most detailed empirical work on microdata sets the models we consider are a bayesian learning model due to jovanovic 20 and a model of research and exploration due to ericson and pakes 11 the paper provides a simple set of empirical procedures to help determine which if either of these two models might be appropriate for alternative data sets we conclude by checking for the implications of the two models on an eight year panel of wisconsin firms the results indicate that one model is consistent with the data on manufacturing firms while the other is consistent with the data on retail trade journal of economic literature classification numbers c52 l60 l80

bond pricing and the term structure of interest rates a new methodology for contingent claims valuation this paper presents a unifying theory for valuing contingent claims under a stochastic term structure of interest rates the methodology based on the equivalent martingale measure technique takes as given an initial forward rate curve and a family of potential stochastic processee for its subsequent movements a no arbitrage condition restricts this family of processes yielding valuation formulae for interest rate sensitive contingent claims which do not explicitly depend on the market prices of risk examples are provided to illustrate the key results in relation to the term structure of interest rates arbitrage pricing theory has two purposes the first is to price all zero coupon default free bonds of varying maturities from a finite number of economic fundamentals called state variables the second is to price all interest rate sensitive contingent claims taking as given the prices of the zero coupon bonds this paper presents a general theory and a unifying framework for understanding arbitrage pricing theory in this context of which all existing arbitrage pricing models are special cases in particular vasicek 1977 brennan and schwartz 1979 langetieg 1980 ball and torous 1983 ho and lee 1986 schaefer and schwartz 1987 and artzner and delbaen 1988 the primary contribution of this paper however is a new methodology for solving the second problem i e the pricing of interest rate sensitive contingent claims given the prices of all zero coupon bonds the methodology is new because i it imposes its stochastic structure directly on the evolution of the forward rate curve ii it does not require an inversion of the term structure to eliminate the market prices of risk from contingent claim values and iii it has a stochastic spot rate process with multiple stochastic factors influencing the term structure the model can be used to consistently price and hedge all contingent claims american or european on the term structure and it is derived from necessary and more importantly sufficient conditions for the absence of arbitrage the arbitrage pricing models of vasicek 1977 brennan and schwartz 1979 langetieg 1980 and artzner and delbaen 1988 all require an iformerly titled bond pricing and the term structure of interest rates a new methodology

pricing credit derivatives with rating transitions we present a model for pricing risky debt and valuing credit derivatives that is easily calibrated to existing variables our approach expands a classical term structure model to allow for multiple rating classes of debt the framework has two salient features 1 it uses a rating transition matrix as the driver for the default process and 2 the entire set of rating categories is calibrated jointly which allows arbitrage free restrictions across rating classes as a bond migrates among them we illustrate the approach by applying it to price credit sensitive notes that have coupon payments linked to the rating of the underlying credit

energy consumption and energy r d in oecd perspectives from oil prices and economic growth abstract we estimate the short run and long run elasticities of various types of energy consumption and energy r d to changes in oil prices and income of the 20 oecd countries over the period of 1980 2010 using the nerlove partial adjustment model npam we find negative income elasticity for coal consumption but positive income elasticity for oil and gas consumption suggesting the importance of economic growth in encouraging the usage of cleaner energy from coal to oil and gas by introducing time dummies into the regressions we show that climatic mitigation policies are able to promote the usage of cleaner energies through the dynamic linkages between energy consumption and energy r d we find that fossil fuel consumption promotes fossil fuel r d and fossil fuel r d in turn drives its own consumption renewable energy r d which is more responsive to economic growth reduces fossil fuel consumption and hence fossil fuel r d

a natural experiment of the effect of advertising on sales the sasol case the effect of advertising in a major product category petrol on the market share of a brand petrol produced by sasol of south africa was estimated using variants of a koyck distributed lag model our use of a single equation model was supported by granger causality tests showing that advertising caused sales but that sales did not simultaneously cause advertising the situation is a unique natural experiment in that non promotional variables in the marketing mix price location of sale and product characteristics are largely invariant between sasol s petrol and competing brands allowing isolation of the effect of advertising on market share dummy variables were used to allow for the varying effect of different advertising campaigns and thus allow for the quality of advertising copy the results supported the hypotheses that sales are determined by past as well as current advertising expenditures but that the cumulative effects of advertising lasts for months rather than years the major finding

seasonality in dynamic regression models this paper examines the implications of treating seasonality as an unobserved component which changes slowly over time this approach simplifies the specification of dynamic relationships by separating non seasonal from seasonal factors we illustrate this approach using the consumption model of davidson et al 1978 and estimate a stable error correction model between consumption income and prices over the period 1958 92 more generally we argue that autoregressive models are unlikely to successfully model slowly changing seasonality and may confound seasonal effects with the dynamic responses of prime interest our approach can be used in a wide range of cases and we show that there is little loss in efficiency even if seasonality is deterministic

nonparametric estimation of the effects of advertising the case of lydia pinkham this article reexamines some of the issues raised subsequent to the classical research by palda 1964 we use a nonparametric estimation method that allows us to incorporate both seasonal and smoothness constraints to estimate the parameters of a demand function using monthly data on lydia pinkham s vegetable compound the analysis indicates that the parameters of the estimated demand equation are not constant throughout the long period of the data which covers the whole life cycle of the product

a discrete time approach to arbitrage free pricing of credit derivatives this paper develops a framework for modelling risky debt and valuing credit derivatives that is flexible and simple to implement and that is to the maximum extent possible based on observables our approach is based on expanding the heath jarrow morton term structure model to allow for defaultable debt rather than follow the procedure of implying out the behavior of spreads from assumptions concerning the default process we work directly with the evolution of spreads the risk neutral drifts in the resulting model possess a recursive representation that facilitates implementation and makes it possible to handle path dependence and early exercise features without difficulty the framework permits embedding a variety of specifications for default we present an empirical example of a default structure which provides promising calibration results

estimates of price elasticity of demand for urban freeway use with high frequency control variables the case of santiago chile estimates are presented of toll and fuel price elasticities of demand for urban freeway use in santiago chile high frequency toll and vehicle data were collected from four urban freeways for different route segments and times of day estimation was performed using log linear regression models whose explanatory variables were tolls fuel prices city traffic levels and sets of dichotomous variables to control for daily weekly and monthly seasonality city traffic is a high frequency control of the activity level of the city the elasticities to changes in tolls and fuel were all low in absolute value the toll elasticities were below 0 05 for two freeways and 0 16 for the third while for the fourth which had more alternative routes it was 0 47 the fuel price elasticities were also heterogeneous with values of approximately 0 45 for two freeways and 0 21 for the third whereas for the fourth which had the fewest alternatives it was 0 07

an estimation of u s gasoline demand a smooth time varying cointegration approach abstract in this paper the u s gasoline demand from 1976 to 2008 is estimated using a time varying cointegrating regression we find that price elasticity increased rapidly during the late 1970s and then decreased until 1987 after a relatively small scaled increase decrease cycle from 1987 to 2000 the price elasticity rose again after 2000 the time varying change of the elasticities may be explained by the proportion of gasoline consumption to income and fluctuation of the degree of necessity the result of the error correction model shows that a deviation from a long run equilibrium is corrected quickly and the welfare analysis illustrates there may be a gain by shifting the tax scheme from income tax to gasoline tax

the impact of default risk on the prices of options and other derivative securities abstract this paper presents a model for valuing derivative securities when there is default risk the holder of a security is assumed to recover a proportion of its no default value in the event of a default by the counterparty both the probability of default and the size of the proportional recovery are random the paper shows how data on bonds issued by the counterparty can be used to provide information about model parameters

advertising quality and sales this paper investigates claims that firm specific effects in advertising sales models can be attributed to a positive correlation between advertising and product quality using a standard koyck transformation on an unbalanced panel dataset of uk firms the implied long lasting effects of advertising disappear when firm specific effects are taken into account this conclusion is robust to various econometric approaches however when the firm specific effects are retrieved they are found to correlate strongly with mean advertising there is no discernible link between the firm specific effects and whether a firm perceives quality to be an important form of competition in its market the results give no support to the idea that advertising affects sales through associated product quality they are consistent with the persistence of advertising within firms over time

a one factor model of interest rates and its application to treasury bond options 1990 a one factor model of interest rates and its application to treasury bond options financial analysts journal vol 46 no 1 pp 33 39

an empirical analysis of gasoline demand in denmark using cointegration techniques abstract danish time series data covering the period 1948 1991 are used in order to estimate short run and long run elasticities in gasoline demand a cointegration test for a stable long run relationship between the variables in the model proves to be positive showing a smaller value of the long run price elasticity than often quoted in empirical studies of gasoline demand finally an error correction model is estimated

cointegration analysis of the advertising sales relationship the examination of stochastic properties of the annual advertising and sales data from the lydia pinkham company reveals that the series are cointegrated and therefore possess a long run equilibrium condition according to the estimates of the error correction model of the series in the short run advertising is found to be more responsive than sales in adjustments to eliminate departures from the long run equilibrium condition the author s analysis in general implies that the observed business firms decision rules fixing advertising spending as a percentage of sales revenue may hold as a long run equilibrium condition copyright 1991 by blackwell publishing ltd

semiparametric analysis to estimate the deal effect curve abstract the marketing literature suggests several phenomena that may contribute to the nature of the relationship between sales and price discounts these phenomena can produce complex nonlinearities and interactions in the deal effect curve that are best captured with a flexible approach because a fully nonparametric regression model suffers from the curse of dimensionality the authors propose a semiparametric regression model store level sales over time are modeled as a nonparametric function of own and cross item price discounts and a parametric function of other predictors the authors compare the predictive validity of the semiparametric model with that of two parametric benchmark models and obtain superior performance the results for three product categories indicate threshold and saturation effects for both ownand cross item temporary price cuts the authors also find that the nature of the own item curve depends on other items price discounts comparisons with restricted model specification

innovation and the evolution of market structure this paper examines the association between innovation and the evolution of market structure a dynamic model of market concentration is applied to seventy three u k industries 1970 79 and the results are found to be consistent with the hypothesis that innovation is deconcentrating the results reported here and those contained in earlier work combine to suggest that innovation and changes in market concentration interact in a relatively rapid mutually reinforcing but rather weak spiral of increased innovation and decreasing concentration copyright 1990 by blackwell publishing ltd

the demand for transport fuels in turkey abstract in this paper we estimate the demand for transport fuels in turkey specifically using four different models namely a partial adjustment model a distributed lag model an autoregressive distributed lag model and an error correction model we estimate gasoline and diesel demand functions with quarterly data covering the period 2003 q1 2014 q3 we find a stable long run relationship only for diesel demand income and price our results imply that gasoline demand does not respond to income and price in the long run reflecting a shift from gasoline towards diesel induced by differential tax policies furthermore we find that transport fuel demand is price inelastic making tax on fuel a perfect tool for raising budget revenues in addition our results suggest that fuel demand responds to negative and positive price changes symmetrically

short and long run elasticities of gasoline demand in india an empirical analysis using cointegration techniques abstract in developing countries like india consumption of petroleum products has implications on its balance of payments economic growth and fiscal deficit gasoline is one of the prime petroleum products in this paper the relationship between gasoline demand national income and price of gasoline is empirically examined using cointegration and error correction techniques the time frame of the analysis is from 1972 1973 to 1993 1994 it has been found that gasoline demand is likely to increase significantly for a given increase in the gross domestic product the increase will be larger in the long run 2 682 than in the short run 1 178 gasoline demand is relatively inelastic to price changes both in the long and short terms the error correction model has shown that gasoline demand adjusts to their respective long run equilibrium at a relatively slow rate with about 28 of adjustment taking place in the first year

short run long run and cross elasticities of gasoline demand in brazil gasoline is one of the most important of the oil derived products its importance is closely related to its participation in the value of imports of many countries and in a number of cases it is one of the determinants of their balance of payment deficit fiscal deficit and economic growth as opposed to most nations brazil has had a gasoline substitute since 1985 alcohol many studies have tried to estimate the income and price elasticities of the demand for gasoline in several countries this paper extends previous studies by estimating the cross price elasticity between gasoline and alcohol our findings indicate that alcohol is an imperfect substitute for gasoline even in the long run as a consequence the need for a new fuel substitution must be initiated long before petroleum reserves vanish

productivity analysis of u s manufacturing using a stochastic coefficients production function in this article we show that the production aggregation and estimation theories that lead to a stochastic coefficients production function are more general than those leading to a fixed coefficients production function estimates of productivity changes implied by these two types of cobb douglas production functions are compared for several u s manufacturing sectors for the period 1955 1982 all of the estimates of the stochastic coefficients cobb douglas function have the right algebraic sign for all industries considered whereas some of the estimates of its fixed coefficients counterpart have the wrong sign

the intersection of market and credit risk abstract economic theory tells us that market and credit risks are intrinsically related to each other and not separable we describe the two main approaches to pricing credit risky instruments the structural approach and the reduced form approach it is argued that the standard approaches to credit risk management creditmetrics creditrisk and kmv are of limited value when applied to portfolios of interest rate sensitive instruments and in measuring market and credit risk empirically returns on high yield bonds have a higher correlation with equity index returns and a lower correlation with treasury bond index returns than do low yield bonds also macro economic variables appear to influence the aggregate rate of business failures the creditmetrics creditrisk and kmv methodologies cannot reproduce these empirical observations given their constant interest rate assumption however we can incorporate these empirical observations into the reduced form of jarrow and turnbull 1995b drawing the analogy risk 5 63 70 model here default probabilities are correlated due to their dependence on common economic factors default risk and recovery rate uncertainty may not be the sole determinants of the credit spread we show how to incorporate a convenience yield as one of the determinants of the credit spread for credit risk management the time horizon is typically one year or longer this has two important implications since the standard approximations do not apply over a one year horizon first we must use pricing models for risk management some practitioners have taken a different approach than academics in the pricing of credit risky bonds in the event of default a bond holder is legally entitled to accrued interest plus principal we discuss the implications of this fact for pricing second it is necessary to keep track of two probability measures the martingale probability for pricing and the natural probability for value at risk we discuss the benefits of keeping track of these two measures

an integrated pricing model for defaultable loans and bonds abstract in recent years credit risk has played a key role in risk management issues practitioners academics and regulators have been fully involved in the process of developing studying and analysing credit risk models in order to find the elements which characterize a sound risk management system in this paper we present an integrated model based on a reduced pricing approach for market and credit risk its main features are those of being mark to market and that the spread term structure by rating class is contingent on the seniority of debt within an arbitrage free framework we introduce issues such as the integration of market and credit risk the use of stochastic recovery rates and recovery by seniority moreover we will characterize default risk by estimating migration risk through a mortality rate actuarial based approach the resultant probabilities will be the base for determining multi period risk neutral transition probability that allow pricing of risky debt in the trading and banking book

analysing gasoline demand elasticities a survey this paper is a survey of studies on gasoline demand although there are very many dxerent studies in this eld which sometimes appear to arrive at contradictory results we find that with proper stratification of studies by model and data type much of the contict turns to consensus in this survey we classtfy studies by data type and by ten d erent categories of model and with the exception of estimates on seasonal data which tend to be unstable and of certain inappropriate model formulations we find a fair degree of agreement concerning average short run and even long run income and price elasticities

pricing derivatives on financial securities subject to credit risk this article provides a new methodology for pricing and hedging derivative securities involving credit risk two types of credit risks are considered the first is where the asset underlying the derivative security may default the second is where the writer of the derivative security may default we apply the foreign currency analogy of jarrow and turnbull 1991 to decompose the dollar payoff from a risky security into a certain payoff and a spot exchange rate arbitrage free valuation techniques are then employed this methodology can be applied to corporate debt and over the counter derivatives such as swaps and caps the purpose of this article is to provide a new theory for pricing and hedging derivative securities involving credit risk two sources of credit risk are identified and analyzed the first is where the asset underlying the derivative security may default paying off less than promised this is the case for example with imbedded options on corporate debt the second is the credit risk introduced by the writer of the derivative security who may also default examples include over the counter writers of options on eurodollar futures swaps and swaptions for pricing derivative securities involving credit risk there are currently two approaches the first views these derivatives as contingent claims not on the financial securities themselves but as compound options on the assets underlying the financial securities this is the case for example with the pricing of imbedded options on corporate debt see merton 1974 1977 black and cox 1976 ho and singer 1982 chance 1990 and kim ramaswamy and sundaresan 1993 or the pricing of vulnerable options see johnson and stulz 1987 in practice however this valuation methodology is difficult to use first the assets underlying the financial security are often not tradeable and therefore their values are not observable this makes application of the theory and estimation of the relevant parameters problematic second as in the case of corporate debt all of the other liabilities of the firm senior to the corporate debt must first and simultaneously be valued this generates significant computational difficulties as a result this approach has not

elasticities of transport fuels at times of economic crisis an empirical analysis for spain abstract this paper provides an updated calculation of the price and income responsiveness of spanish consumers of transport fuels with an explicit exploration of the effects of the recent economic crisis we examine separate gasoline and diesel demand models using a set of estimators on a panel of 16 spanish regions over the period 1999 2015 the paper confirms the persistence of low own price elasticities both for diesel and gasoline in the short and long runs it also shows that the crisis of 2008 2013 slightly increased the price elasticity of demand for transport fuels with a higher effect on diesel than on gasoline by contrary the crisis slightly reduced the income elasticity of transport fuel demand given the intensity and length of the economic recession in spain the results of this paper may be useful to anticipate the effects of domestic public policies that impact transport fuel prices as well as to advance some of the potential consequences of crises elsewhere

road transport energy demand in australia a cointegration approach abstract a cointegration framework is used to examine the short run and long run characteristics of energy demand in the australian road transport sector a lagged endogenous equation based on a partial adjustment process is proposed and estimated results indicate that energy demand output and real energy prices are integrated of order 1 and cointegrated the long run output and price elasticities of energy demand are estimated to be 0 52 and 0 12 respectively causality tests ervealed a bidirectional causality path between output and energy demand and a unidirectional path from energy consumption to prices no other causality paths between output prices and energy demand are detected the short run output elasticity of energy demand is estimated to be 0 25 based on an error correction model the short run price elasticity is found to be insignificant the inertia parameter is 0 48 corresponding to 95 of the demand adjustment occurring after five periods the results are compared with previous findings and the variations are partially attributed to the structural changes in the road transport sector in the 1980s some of which are discussed

temporal aggregation the data interval bias and empirical estimation of bimonthly relations from annual data in an important study reviewing the literature on econometric studies of the relationship between advertising and sales clarke clarke darral g 1976 econometric measurement of the duration of advertising effects on sales j marketing res 13 november 345 357 concluded that the implied duration interval of the effects of advertising on sales were too long when the studies used annual data a theoretical explanation is provided here for the observation of parameter estimates which vary with the data interval employed in the analysis parameter estimates are developed on the basis of data aggregated at various levels of temporal aggregation and compared with theoretical values it is demonstrated that it is possible to recover bimonthly parameters when only annual data are available

evaluating corporate bonds with complicated liability structures and bond provisions this paper presents a general and numerically accurate lattice methodology to price risky corporate bonds it can handle complex default boundaries discrete payments various asset sales assumptions and early redemption provisions for which closed form solutions are unavailable furthermore it can price a portfolio of bonds that accounts for their complex interaction whereas traditional approaches can only price each bond individually or a small portfolio of highly simplistic bonds because of the generality and accuracy of our method it is used to investigate how credit spreads are influenced by the bond provisions and the change in a firm s liability structure due to bond repayments

the durability of advertising revisited recent cross section studies find that advertising is relatively long lived providing support for treating advertising as capital this paper models the firm s advertising decision treating advertising and product quality as complements the model predicts that failing to control for differences in firm specific factors positively correlated with the return to advertising will understate advertising s direct effect on sales and overstate its durability the authors empirical study using several years of data for over four hundred firms confirms these predictions advertising s apparent life shrinks dramatically when firm specific factors are held constant they also find no support for the steady state assumptions critical to intangible assets models copyright 1994 by blackwell publishing ltd

term structures of credit spreads with incomplete accounting information we study the implications of imperfect information for term structures of credit spreads on corporate bonds we suppose that bond investors cannot observe the issuer s assets directly and receive instead only periodic and imperfect accounting reports for a setting in which the assets of the firm are a geometric brownian motion until informed equityholders optimally liquidate we derive the conditional distribution of the assets given accounting data and survivorship contrary to the perfect information case there exists a default arrival intensity process that intensity is calculated in terms of the conditional distribution of assets credit yield spreads are characterized in terms of accounting information generalizations are provided

credit swap valuation this review of the pricing of credit swaps a form of derivative security that can be viewed as default insurance on loans or bonds begins with a description of the credit swap contract turns to pricing by reference to spreads over the risk free rate of par floating rate bonds of the same quality and then considers model based pricing the role of asset swap spreads as a reference for pricing credit swaps is also considered

estimating long run economic equilibria with stochastic trends an asymptotic theory is provided to analyze a menu of currently existing estimators of cointegrated systems we study in detail the single equation ecm seecm approach of hendry our theoretical results lead to prescriptions for empirical work such as specifying seecm s nonlinearly and including lagged equilibrium relationships rather than lagged differences of the dependent variable as covariates simulations support these prescriptions and point to problems of overfitting not encountered in the semiparametric approach of phillips and hansen 1990

advertising in consumer goods industries durability economies of scale and heterogeneity hree prominent explanations can be offered for the large and persistent recorded profit rates of firms in heavily advertised consumer goods industries these explanations are based on durability scale economies and heterogeneity for advertising respectively the first explanation posits a prolonged durability for advertising as a consequence recorded profit rates are overstated because accounting convention expenses advertising rather than properly treating it as an investment in durable assets 2 when the durability of advertising is sufficiently prolonged normal returns on the unreported advertising assets fully account for apparent windfall profits a second explanation rests on the presumed collusion