Paper # Author Title  
This paper surveys the significance of recent work on emulative neural networks (ENNs) by researchers across many disciplines in the light of issues of indeterminacy. Financial and economic forecasters have witnessed the recent development of a number of new forecasting models. Traditionally, popular forecasting techniques include regression analysis, time-series analysis, moving averages and smoothing methods, and numerous judgmental methods. However, all of these have the same drawback insofar as they require assumptions about the form of population distribution. Regression models, for example, assume that the underlying population is normally distributed. ENNs are members of a family of statistical techniques, as are flexible nonlinear regression models, discriminant models, data reduction models, and nonlinear dynamic systems. They are trainable analytic tools that attempt to mimic information processing patterns in the brain. Because they do not necessarily require assumptions about population distribution, economists, mathematicians and statisticians are increasingly using ENNs for data analysis. Download Paper
One consequence of dynamic system theory is that relatively simple systems, which can be described by a few non-linear equations, can exhibit very complicated, stochastic-like behavior. Such models simulate processes inexpensively. They reveal insights into the underlying mechanisms while devising strategies to control these processes. Chaotic systems are sensitive to initial conditions. Since these conditions are not precisely known and are subject to perturbations, long-term predictions of the behavior of these systems are impossible. Thus, the availability of large computational resources will not enable one to generate long-term predictions for systems ranging from weather to economic forecasts. Download Paper
This paper studies the characteristics of thirteen small European stock markets, in order to find international support for the presence of efficiency in financial markets. The thirteen bourses are located in Belgium, Denmark, Finland, Greece, Ireland, Luxembourg, Netherlands, Norway, Portugal, Spain, Sweden, Switzerland and Turkey. The paper tests the Overreaction and Uncertain Information Hypotheses by examining the behavior of these markets over a 60-day period following positive or negative market disruptions. The conclusions are that for this particular time lag most small European stock markets operate under efficient conditions. Download Paper
The Middle East Stock exchanges are becoming attractive due to the unprecedented decrease of information costs. Employing Vector Auto Regression (VAR) and Bayesian VAR models to trace the dynamic co movements among the stock indices for the emerging Middle East and the major index of the United States market. The Middle East countries included are: Egypt, Israel, Jordan, Lebanon, Morocco, Oman, and Turkey. Monte Carlo simulations trace the effects of transmission of innovations from one market to other. The dynamic linkages among these stock markets are relatively small, suggesting benefits to investors who would like to improve on their portfolio. Download Paper
Random Walk and Efficient Market Hypotheses are central ideas in explaining financial market efficiencies. The assumption that market behavior embodies and reflects relevant information has a great impact on securities prices. Any change in the relevant information causes price adjustment. In contrast, technical analysts argue that prices gradually adjust to new information. Thus, historical analysis is useful in diagnosing the repeated pattern behaviors leading to active investment strategies that generate better- than-market returns. The purpose of this study is to examine the efficacy of using technical trading rules in the emerging market of Israel, through the analysis of the Tel-Aviv 25 Index (TA25) and to compare its weak-form market efficiency to the performance of the S&P 500. Download Paper
Venture investment activity covers many phases of financial stages. In spite of the increased attention to the venture capital process during the last three decades, misconceptions about the industry still exist. This paper examines annualized returns for different stages of financing in venture-backed public companies. The unique database includes current actively and inactively trading public companies. The data enable one to ascertain the relationship among companies’ annualized rates of return, share price at the Initial Public Offering (IPO) date, IPO size, current total shares, and the role of venture capital. Annualized returns are found to be positively affected by cumulative returns, IPO year, current price, and IPO size in dollars while being negatively influenced by IPO price. The paper refutes the myth that investors demand very high rates of return to compensate for the risks involved in financing ventures. Download Paper
This paper analyzes the utility maximization of a burglar who anticipates the revenue generated by his action along with the associated costs. The benefits are the value of the loot. Costs include the location of the home, the physical appearance, the demographic characteristics, and the security precautions present. When combined, they will either attract or detract criminal activity. A survey relating characteristics of Greenwich, Connecticut homes to burglary rates is used. The Logit model and the odds ratio integrate the above home characteristics to determine the likelihood of the home being victimized. The odds ratio calculates the probabilities of the home being victimized as a function of its characteristics. The results suggest the relative importance of each factor in contributing to the home becoming a target of burglary. The model can be used to predict the chances of homes being burgled depending on it specific attributes. Download Paper
The potential impact of continued economic growth on world energy markets could be substantial. Rapid growth projections into the next ten and twenty years suggested that the East Asian area (Korea, China, Hong Kong, Malaysia, Philippines, Thailand, Indonesia, and Singapore, where Japan is included with the OECD high-income countries) will be a major center of world GDP. Thus, the region’s burgeoning energy needs would make an important difference in the supply-demand balance and would raise world energy prices. The environmental implications for the rise in energy are evident. This paper analyzes the implications of the l997 East Asian crisis on the projections of energy used by this region. Estimates of the energy elasticities based on pooled cross section and time series are used to forecast energy and petroleum consumption and imports into the region under a variety of assumptions about the future economic outlook and policy. Download Paper
The objective of this paper is to assess the investment opportunities emerging in the newly developing stock markets of Eastern Europe. The Czech Republic, Hungary, and Poland, representative of the emerging stock markets of Eastern Europe, are examined from the perspective of a US investor who invests solely in the US markets. During the period November 24, 1994 to May 12, 1995, the most advantageous investment strategy is derived using optimization algorithms, comparing the optimal portfolio in the stock markets of a select group of Eastern European countries against the S&P 500 Index, representative of the US stock markets. Based on market volatility, sovereign risks, and foreign exchange the risks and rewards of investing in these countries are appraised. The results show that the risk-adjusted return, yielded from the optimal portfolio, exceeds or equals the return realizable from investing in stock markets with lesser degrees of risk. Download Paper
The objective of this paper is to examine the dynamic interrelations among major world stock markets through the use of artificial neural networks. The data was derived from daily stock market indices of the major world stock markets of Canada, France, Germany, Japan, United Kingdom (UK), the United States (US), and the world excluding US (World). Multilayer Perceptron models with logistic activation functions were better able to foresee the daily stock returns than the traditional forecasting models, in terms of lower mean squared errors. Furthermore, a multilayer perceptron with five units in the hidden layer seemed to predict more precisely the returns of stock indices than a neural network with two hidden elements. Hence, it is inferred that neural systems could be used as an alternative or supplemental method for predicting financial variables and thus justified the potential use of these model by practitioners. Download Paper
While most studies on immigration focus on its impact on the labor market, in this study we address its effect on socioeconomic gaps. By studying Israeli immigration,m we examine the effects of mass immigration on socioeconomic gaps among generations using the Israeli Censuses for 1961 and 1983. We look at the socioeconomic gaps within two difference economic systems within the same economy. One system is perfect competition oriented while the second, the kibbutz, is organized as a labor-managed firm. Both generations distinguished between the different ethnic groups and the parents' country of origin. In particular, three groups are examined, in the first generation using the 1961 census, those who were born in Asian and African countries, in European and American countries, and in Israel. In the second generation, using the 1983 census, we look at those whose fathers were born in the respective areas. The analysis decomposes the Occupation Socioeconomic Score (OSS) differentials into human capital and market evaluation differences for each generation separately. The model develops a gap function that quanti ̄es the socioeconomic gaps and uses iso-gap curves to compare pre-immigration and post-immigration gaps.The study finds that the score differentials among the examined groups in the kibbutz are lower than in the city, prior to the second wave of immigration. Even after the second wave of immigration the score differentials in the kibbutz, among the examined groups, are lower than in the city. We attempt to explain this occurrence by looking at how society in the kibbutz differs in the treatment of immigrants. In particular, we focus on how the kibbutz, because of its size and reward structure, is able to internalize certain externalities and aim at a relatively higher level of education for all. Download Paper
This paper shows that the economic policies of the US and Japan have led to disequilibrium in the pattern of trade. Both economies have built-in mechanisms tending towards equilibrium. However, with restrictive policies imposed by these countries, disequilibrium is perpetuated. The US "suffers" a trade deficit, while Japan enjoys" a trade surplus. Although a trade surplus has a positive connotation, the prevailing strong yen hurts the Japanese economy. With a more integrated world, countries can no longer be concerned solely about their own economies. The recession in Japan is partially caused by this large imbalance in trade since the strong yen is driving out many Japanese businesses that can no longer compete. The large government deficit in the United States will also affect the exchange rate and the rest of the world, since the possibility of a default may raise the interest rates as well as the level of uncertainty. Countries must cooperate with each other in order to allow the world economy to reach its equilibrium. Intervention polices require that the citizens in each country actually trust that governments are committed to resolve the enigma of the strong Yen (endaka). Without strong conviction by the public that the policy would be seriously implemented, the exchange rates will not change in the desired direction. Download Paper
This paper examines the strategy of investing in seven Latin American emerging stock markets: Mexico, Brazil, Argentina, Colombia, Peru, Venezuela, and Chile. International Portfolio investment gradually increased during the late 1980s and the 1990s in this region. Investors willing to assume the additional risk present in these markets have been well compensated. Yet, many market analysts have indicated that such markest are somewhat of an abnormality, in that they tend to be characterized as thin, narrow and driven by poorly informed individuals rather than by fundamentals. The optimization algorithms include Markowitz variance-covariance and lower partial moment. The optimal portfolios are evaluated using criteria such as terminal wealth, Sharpe utility measure, Treynor and Jensen measures, and reward to semi-variance. In addition, portfolios which employed ̄rst, second and third degree stochastic dominances are presented. It is shown that possesing a diversified international portfolio which includes Latin American stocks is beneficial. Download Paper
Understanding the spatial search of burglars is based upon rational choice models which were developed in environmental criminology and economics, and applied also in regional science. The objective is to see whether the behavior of burglars is rational and whether they evaluate alternative courses of action, including the location of the home, its attributes and surroundings, and the security precautions held in the target choice. Such understanding is significant in the design of strategies for police and private security companies aimed at reducing residents' risk of becoming burglary victims. Such findings can also aid residents in selecting the most effective physical security precautions and the preferred behavior to minimize the probability of being victimized. Furthermore, local governments may choose to reduce their visibility and leave space for market forces to fulfill some of the functions and duties that are currently considered to be police responsibility. This paper offers an empirical model which explains the target choice by residential burglars. The model can also be used to predict the relative effectiveness of various security measures in reducing burglary incidents. A logistic regression analysis was employed to estimate the probability of households being burgled as a function of the location of the home with respect to major arterial routes, as well as the attributes of the house, immediate surroundings, and the security precautions that were in use. Download Paper
This paper analyses the optimal investment strategy in the stock markest of a selected group of South American countries: Mexico, Brazil, Argentina, and Chile. The Markowitz efficiency frontiers are derived based on daily stock market index returns expressed in US dollars, for the period of January 1, 1988 through December 23, 1993. In addition to the Markowitz algorithm, the low partial moment algorithm is used. The benefits of international diversification are studied from the perspectives of an American investor who can invest both in the U.S. and in the South American stock markets. The paper assesses the risks and rewards of investing in these countries based on both foreign exchange as well as sovereign risks. It is shown that the optimal portfolio derived provides a risk-adjusted return that is better or, as good as, the return realizable from investing in stock markets with lesser degrees of risk. The optimal portfolio is calculated based on stock-market returns for the emerging South American countries mentioned, with the S&P 500 Index incorporated into the analysis. The portfolio's performance is then measured using various portfolio evaluation techniques. Download Paper
This paper examines the behavior of European Community stock markets in light of decreased barriers to internatinal investments and improved accessibility to information. The Vector Autoregression (VAR) model is able to identify the main channels of interactions and simulate the responses of a given market to innovations in other markets. The daily returns are expressed in terms of German Marks, reflecting the outlook of European investors. This paper hypothesizes that an innovation in one market is directly, rather than serially, transmitted to all other markets. The research shows that no market is found to be completely isolated from ther others; however, these patterns of transmittal are still consistent with international market efficiency. Download Paper
This paper examines the effects of various economic factors on the black market exchange rate premium in developing countries using monthly data from 1985 to 1989. The model analyzes the interaction of stock and flow conditions in determining both the premium on the black dollar and the stock of black money. Some of the factors this paper hypothesizes to de­ termine the black market premium is the official real exchange rate, the official depreciation-adjusted interest rate differential, the level of exports, and a seasonal factor associated with tourism. The empirical results tend to agree with the findings of Dornbusch et. a1. (QJE, February 1983). These results are important because they provide a starting point for governments to control the level of black market activity. Download Paper
Vector Auto Regression (VAR) models are used to trace the dynamic linkages across daily returns of national stock market indices of Latin America, and among the Latin American and major world stock market indicies. The Latin American indices include: Argentina, Brazil, Chile, and Mexico. The majorworld stock market indices include: the US; the world excluding the US; United Kingdom; Japan; Germany; France; and Canada. Although most of the impulse responses die out very quickly, it is still possible to trace the dynamic linkages among markets. The dynamic linkages among the Latin American markets and among the Latin American and major world stock markets are found to be relatively small. The conclusion is that although markets are efficient and cleared out in a few trading days, there are dynamic linkages that can be explored and exploited to the benefit of the diversified international investor. Download Paper