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Using transaction level data for dwellings in Paris, France over the period 1986-92, we find evidence consistent with the hypothesis that economic fundamentals constrain movements in Parisian dwelling prices over longer term horizons. The conclusion is based on the results of two different procedures for estimating an error correction model of housing prices based on supply and demand fundamentals. The error correction models suggest that the speed of adjustment in the Paris dwelling market is about 30% per month. The paper also introduces a new econometric methodology that permits simultaneous estimation of the parameters of a dynamic hedonic price model, the price index, and the parameters of a structural model for housing prices. The new methodology is compared with the more traditional two-step procedure of first estimating a price index, and then using the estimated index in subsequent structural modeling.

The paper examines the predictive performance of four structural exchange rate models using both parametric and nonparametric techniques. Error correction versions of the models are fit so that plausible long-run elasticities can be imposed on the fundamental variables of each model. A variety of model evaluation statistics are reported. Our findings confirm that fundamental exchange rate models forecast no better than a random walk model for short-term prediction horizons. For longer horizons, error correction terms can explain exchange rate movements significantly better than a no change forecast for a subset of the models and currencies we consider. Key words: Exchange rates; Forecasting; Random walk

Tests of the housing price present value (PVR) relations can be used to evaluate the efficiency of residential housing markets. The efficient market condition for real estate states that the real homeowner capital cost is equal to the real expected return from home ownership. In addition, efficiency implies that in real estate, capitalized rents represent prices. Data from Alameda and San Francisco Counties, CA, are used to derive indices for price, rent and cost of capital. In the short-run, the housing price present value relation based on these indices is rejected, possibly because of the inherent information asymmetries, high transactions costs and heterogeneity of beliefs and assets. However, the PVR in the long-run indicates the cointegration of prices and capitalized rents. In addition, controlling for tax rate and real borrowing cost changes during the sample period allows the imposition of the PVR as a long-term housing relation.

Various observations are presented that serve as commentaries to the issues outlined by Michael P. Clements and David F. Hendry on forecast accuracy measurements. Using the mean square forecast error, both Clements and Hendry succeeded in outlining an acceptable criterion for evaluating forecasts. With respect to a reasonable set of transformations, however, the criterion only appeals to the principle of invariance thus leaving open the question of determining between alternative invariant measures.

Examines the rationale for strategic hedging policy as of June 2001. Discussion on current literature regarding hedging policy; Facts on the use of portfolio optimization methods; Guidelines for the calculation of hedge ratios.

This article examines a number of hypotheses that underpin the repeat-sales and hedonic approaches to the construction of housing price indices, as well as the practical problems associated with the implementation of either approach. We also examine a hybrid procedure that combines elements of both the repeat-sales and hedonic-regression techniques. For our sample of individual home sales in Oakland and Fremont California over an 18-year period, repeat-sales methods are subject to sample selection bias: the maintained assumption of time constancy of implicit prices of housing attributes is violated: the repeat-sales estimator is extremely sensitive to influential observations; and the usual method used to correct for heteroskedasticity in repeat-sale housing returns is inappropriate in our sample. Hedonic techniques are better suited to contend with index number problems per se, as they can accommodate changing attribute prices over time. They also appear to give rise to more reliable estimates of price indices, as unusual observations have less effect on estimated price indices. Drawbacks of the hedonic approach include the usual concern with omitted attributes, and their effect on the estimated price index. [ABSTRACT FROM AUTHOR]