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"Mathematical methods"
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General diagnostic tests for cross-sectional dependence in panels
This paper proposes simple tests of error cross-sectional dependence which are applicable to a variety of panel data models, including stationary and unit root dynamic heterogeneous panels with short T and large N. The proposed tests are based on the average of pair-wise correlation coefficients of the OLS residuals from the individual regressions in the panel and can be used to test for cross-sectional dependence of any fixed order p, as well as the case where no a priori ordering of the cross-sectional units is assumed, referred to as CD(p) and CD tests, respectively. Asymptotic distribution of these tests is derived and their power function analyzed under different alternatives. It is shown that these tests are correctly centred for fixed N and T and are robust to single or multiple breaks in the slope coefficients and/or error variances. The small sample properties of the tests are investigated and compared to the Lagrange multiplier test of Breusch and Pagan using Monte Carlo experiments. It is shown that the tests have the correct size in very small samples and satisfactory power, and, as predicted by the theory, they are quite robust to the presence of unit roots and structural breaks. The use of the CD test is illustrated by applying it to study the degree of dependence in per capita output innovations across countries within a given region and across countries in different regions. The results show significant evidence of cross-dependence in output innovations across many countries and regions in the World.
Journal Article
On time-inconsistent stochastic control in continuous time
In this paper, which is a continuation of the discrete-time paper (Björk and Murgoci in Finance Stoch. 18:545–592,
2004
), we study a class of continuous-time stochastic control problems which, in various ways, are time-inconsistent in the sense that they do not admit a Bellman optimality principle. We study these problems within a game-theoretic framework, and we look for Nash subgame perfect equilibrium points. For a general controlled continuous-time Markov process and a fairly general objective functional, we derive an extension of the standard Hamilton–Jacobi–Bellman equation, in the form of a system of nonlinear equations, for the determination of the equilibrium strategy as well as the equilibrium value function. The main theoretical result is a verification theorem. As an application of the general theory, we study a time-inconsistent linear-quadratic regulator. We also present a study of time-inconsistency within the framework of a general equilibrium production economy of Cox–Ingersoll–Ross type (Cox et al. in Econometrica 53:363–384,
1985
).
Journal Article
Modeling shallow water flows using the discontinuous Galerkin method
Replacing the Traditional Physical Model Approach. Computational models offer promise in improving the modeling of shallow water flows. As new techniques are considered, the process continues to change and evolve. Modeling Shallow Water Flows Using the Discontinuous Galerkin Method examines a technique that focuses on hyperbolic conservation laws and includes one-dimensional and two-dimensional shallow water flows and pollutant transports. Combines the Advantages of Finite Volume and Finite Element Methods.
BOOK
Why Propensity Scores Should Not Be Used for Matching
We show that propensity score matching (PSM), an enormously popular method of preprocessing data for causal inference, often accomplishes the opposite of its intended goal—thus increasing imbalance, inefficiency, model dependence, and bias. The weakness of PSM comes from its attempts to approximate a completely randomized experiment, rather than, as with other matching methods, a more efficient fully blocked randomized experiment. PSM is thus uniquely blind to the often large portion of imbalance that can be eliminated by approximating full blocking with other matching methods. Moreover, in data balanced enough to approximate complete randomization, either to begin with or after pruning some observations, PSM approximates random matching which, we show, increases imbalance even relative to the original data. Although these results suggest researchers replace PSM with one of the other available matching methods, propensity scores have other productive uses.
Journal Article
Centrality measures in networks
We show that prominent centrality measures in network analysis are all based on additively separable and linear treatments of statistics that capture a node’s position in the network. This enables us to provide a taxonomy of centrality measures that distills them to varying on two dimensions: (i) which information they make use of about nodes’ positions, and (ii) how that information is weighted as a function of distance from the node in question. The three sorts of information about nodes’ positions that are usually used—which we refer to as “nodal statistics”—are the paths from a given node to other nodes, the walks from a given node to other nodes, and the geodesics between other nodes that include a given node. Using such statistics on nodes’ positions, we also characterize the types of trees such that centrality measures all agree, and we also discuss the properties that identify some path-based centrality measures.
Journal Article
Factor Separation in the Atmosphere : Applications and Future Prospects
\"Modeling atmospheric processes in order to forecast the weather or future climate change is an extremely complex and computationally intensive undertaking. One of the main difficulties is that there are a huge number of factors that need to be taken into account, some of which are still poorly understood. The Factor Separation (FS) method is a computational procedure that helps deal with these nonlinear factors. In recent years many scientists have applied FS methodology to a range of modeling problems, including paleoclimatology, limnology, regional climate change, rainfall analysis, cloud modeling, pollution, crop growth, and other forecasting applications. This book is the first to describe the fundamentals of the method, and to bring together its many applications in the atmospheric sciences. The main audience is researchers and graduate students using the FS method, but it is also of interest to advanced students, researchers, and professionals across the atmospheric sciences\"-- Provided by publisher.
Book
Quantile regression with nonadditive fixed effects
This paper introduces a quantile regression estimator for panel data (QRPD) with nonadditive fixed effects, maintaining the nonseparable disturbance term commonly associated with quantile estimation. QRPD estimates the impact of exogenous or endogenous treatment variables on the outcome distribution using “within” variation in the instruments for identification purposes. Most quantile panel data estimators include additive fixed effects which separates the disturbance term and assumes the parameters vary based only on the time-varying components of the disturbance term. QRPD produces consistent estimates for small T. I estimate the effect of the 2008 tax rebates on the short-term household consumption distribution.
Journal Article