David A. Bessler

• University of California Davis
• Professor Emeritus at Texas A&M University

We conduct Monte Carlo simulations to evaluate the use of information criteria (Akaike information criterion AIC and Schwarz information criterion SC ) as an alternative to various probability-based tests for determining cointegrating rank in multivariate analysis. First, information criteria are used to determine cointegrating rank given the lag o...

Some techniques of probability forecasting are applied to time-series data on interest rates, money stock, consumer prices, and output. A sequential method for debiasing (recalibrating) predictive distributions and outcomes is developed, and the authors estimated sequences of unadjusted and recalibrated distributions are tested for calibration. Aft...

A summary of my career

The simulated choice probabilities in mixed logit models are usually approximated numerically using Halton or random draws from a multivariate mixing distribution for the random parameters. Theoretically, the order in which the estimated variables enter the model should not matter. However, in practice, simulation “noise” inherent in the numerical...

We introduce a flexible copula-based semi-parametric test of financial contagion that is capable of capturing structural shifts in the transmission channel of shocks across a network of financial markets beyond the increase in the intensity of time-varying dependence. We illustrate the capabilities of the proposed test using returns of stock, money...

This paper considers the use of two machine learning algorithms to identify the causal relationships among retail prices, manufacturer prices, and number of packages sold. The two algorithms are PC and Linear Non-Gaussian Acyclic Models (LiNGAM). The dataset studied comprises scanner data collected from the retail sales of carbonated soft drinks in...

This is the first study to explore the transmission paths for liquidity shocks in China's segmented money market. We examine how money market transactions create such pathways between China's closely-guarded banking sector and the rest of its financial system, and empirically capture the transmission of liquidity shocks through these pathways durin...

The papers summarized herein communicate my career of trying to understand what we know about economics and why we think we know it. After 70 years (43 years post PhD) I seem to have settled on the notion that much of what we think we know is highly conditional. I, and perhaps others, have not improved on David Hume. In an evolving universe all kno...

This is the first study to explore the transmission paths for liquidity shocks in China's segmented money market. We examine how money market transactions create such pathways between China's closely-guarded banking sector and the rest of its financial system, and empirically capture the transmission of liquidity shocks through these pathways durin...

This study examines the impact of urban and rural development on poverty and inequality in India before economic reform. The methodology comprises two dimensions. Modern time series methods are used to uncover the dynamic patterns of urban–rural poverty and income inequality. A machine-learning algorithm is used to determine the causal structure am...

Though recent literature uncovers linkages between commodity prices and conflict, the causal direction of the relationship remains ambiguous. We attempt to contribute to this strand of research by studying the dynamic relationship of commodity prices and the onsets of conflict events in Sudan. Using monthly data ranging from January 2001 through De...

This article examines the influence of China B-share aggregates on major Asian stock market aggregates during 2015 China crash. Results indicate the China market shows strong negative impact and is highly responsible for leading most markets down during the crash.

A dynamic system consisting of donations and various sports’ success is estimated to examine relationships among winning and donations. Differences between Power 5, Non-power 5, and Football Championship Series alignments exist. Evidence that successful athletic programs have a positive impact on donations is found regardless of the conference alig...

This article aims to study whether interest rates help to forecast stock returns in China using the prequential approach. A bivariate VAR model and a univariate autoregressive model are examined. Out-of-sample probability forecasts, generated based on both a bootstrap-like simulation method and a nonparametric kernel-based simulation method, are ev...

Nigeria, like most African countries, has engaged in agricultural liberalization since 1986 in the hope that reforms emphasizing price incentives will encourage producers to respond. Thus far, the reforms seem to have introduced greater uncertainty into the market given increasing rates of price volatility. This study amongst other things therefore...

This study investigates information discovery among five Chinese equity markets measured daily over the period 1995 – 2014. We employ time series methods for finding structural breaks (if any) and uncovering both short-run and long-run fluctuations. We apply a new algorithm of inductive causation for use with non-Gaussian data to study the informat...

In Professor George Judge's pursuit of information recovery and isolating causality in noisy effects observational data, there is a critical distinction between deductive and inductive empirical analysis. For the former, we bring together a synthesis of the literature that has emerged since Koopmans' measurement with theory philosophy. For the latt...

In 2015-2016, a team from Texas A&M’s Center on Conflict and Development traveled to Afghanistan to assess the feasibility of establishing a strategic grain reserve in the country. Afghanistan’s Ministry of Agriculture, Irrigation, and Livestock (MAIL) proposes to construct a 400,000 ton Strategic Grain Reserve (SGR). The SGR would have two compon...

The food environment in the United States is complex. Sixteen socio-economic-demographic variables from various public data sources are studied with a machine learning algorithm to ascertain the causality structure associated with the food environment in the United States. High levels of unemployment and poverty are direct causes of high levels of...

Evaluations of generic advertising programs by commodity check-off programs involve analyses of counterfactual scenarios in which advertising and promotion expenditures are set to zero over the program's history. In actual practice, the counterfactual is rarely realized. We present a case in which such a natural experiment occurred when generic adv...

Livestock rearing is an important risk reduction strategy for vulnerable communities in developing countries and a major provider of nutrients and traction for crop production. However there is a great concern for pastoral population in the arid and semi-arid zones of East Africa due to recurring drought. Drought leads to the decline in forage and...

This paper considers univariate and multivariate models to forecast monthly conflict events in the Sudan over the out-of-sample period 2009-2012. The models used to generate these forecasts were based on a specification from a machine learning algorithm fit to 2000-2008 monthly data. The model that includes previous month's wheat price performs bet...

Econometritions frequently believe that standard instrumental variables (IV) methods can prove causal relationships. We review the relevant formal causal inference literature, and we demonstrate that this belief is not justified. Couching the problem in terms of falsification, we describe the more stringent conditions that are sufficient to reject...

This paper examines the U.S. meat demand impacts of the announced outbreaks of bovine spongiform encephalopathy (BSE) and avian influenza (AI). Findings indicate that beef and chicken demand was negatively affected by BSE and AI disease outbreaks. Specifically, in the short run, U.S. consumers shift demand due to both outbreaks but more so due to d...

This article analyses the level of integration in 10 cattle markets in Mali. The results indicate a limited interdependence among markets where, in majority of cases, more than 70 per cent of price variation is due to own-price shocks. However, the Ségou market exhibited a high level of interaction with other markets, behaving mostly as a price inf...

The degree to which the law of one price holds (integration) along with determining each individual markets’ role in price discovery is examined for 11 major natural gas markets, six from the USA and five from Canada. Deregulation, technological advances, and trade agreements have opened the USA’s and Canada’s natural gas market to new and extensiv...

Increases in U.S. consumer incomes result in an increase in imports' share of U.S. consumption. Although U.S. consumers reduce the quantity demanded in response to higher import prices, the reduction is sufficiently inelastic that exporter revenue increases. U.S. Free Trade Agreements have made fresh fruits and vegetables available throughout the y...

The article summarizes the economist's notion of a market and relative price in terms of trade of goods or services in both exchange and planned economies. Pricing efficiency and characteristics of efficient price movement through time are covered. The article concludes with a discussion of the role of the quantity of money or other macroeconomic f...

In this article the authors provide a brief overview of the most commonly used quantitative techniques used to study economic phenomena. The first section presents econometric techniques, the second section presents operations research techniques, the third covers computable general equilibrium, and the fourth deals briefly with application of thes...

This study used aggregated data for fresh vegetables and fresh fruits to analyze how trade flows in the fresh produce industry have changed under trade agreements and to assess the potential implications to nutrition policies in the United States. The first part of the analysis uses a Bai-Perron test to endogenously determine any structural break p...

In this paper, we study the U.S. aggregate business failures during 1980- 2004 in relation to four macroeconomic variables: aggregate corporate profits, the producer price index, the interest rate, and stock market performance. We argue that aggregate business failures should not be treated as a passive variable, as usually done in previous studies...

The study analyzes the impact of a newly introduced market information system “E-Soko” on beans markets integration. Beans, both bush and climbing, are the most important traded crop in rural areas of Rwanda, and third most important in urban areas in terms of value. Bi-weekly prices on beans are analyzed on eight markets across Rwanda for two time...

The paper considers the conjecture that forecasts from preferred economic models or theories d-separate forecasts from less preferred models or theories from the Actual realization of the variable for which a scientific explanation is sought. D-separation provides a succinct notion to represent forecast dominance of one set of forecasts over anothe...

One of the growing agricultural subsectors in developing countries is livestock. Livestock and livestock products account for a third of the agricultural gross output. However, the lack of viable livestock market information systems to increase efficiency of markets and support the decision making of traders, pastoralists, and policy makers are sti...

The study of the predictive outcomes from binary choice models can be enhanced with the use of the Brier score and its associated Yates partition. We demonstrate this enhancement through an example of probabilities issued from a discrete choice model concerning the decision to purchase or not to purchase organic milk. In this example, specification...

In this paper we study a fundamental issue related to the efficient price discovery process using time series data from seven international black tea markets. The major question studied is as follows: Is the price discovery process in black tea markets efficient? We use two statistical techniques as engines of analysis. First, we use time series me...

The authors estimate the market impact of media coverage related to the name “swine flu,” relabeled subsequently as “2009 H1N1 flu,” on the future prices of lean hogs, live cattle, corn, and soybeans. They then quantified the revenue loss, employing the subset vector autoregressive model. The results indicate that the media coverage was associated...

Recent work with graphical methods for inductive causal inference with observational econometric data is reviewed and compared with earlier work. Two alternative algorithms are described. Caveats on applications are discussed. KeywordsMachine learning–Directed acyclic graphs–Markov condition–Causality–Econometrics

This article compares the stability of interrelationships among nine national equity markets by employing basket currencies versus individual base currencies to measure rates of return. We show that the average correlations of equity indexes based on basket currencies are much lower than the average correlations of equity indexes based on individua...

This study uses unrestricted vector autoregression method and historical decomposition with directed acyclic graphs to quantity the impacts of the foot and mouth disease outbreak on the Brazilian meat market for different levels of the industry (export, wholesale and farm). The imposition of an import ban by Russia on Brazilian meat exports is also...

Replaced with revised version of paper 02/22/11.

This study investigates the potential impacts of food safety outbreaks on domestic shipments, imports, and prices of the produce industry. Three case studies were analyzed to assess these potential impacts: the cantaloupe outbreak of March–April 2008, the spinach outbreak of September 2006, and the tomato outbreak of June–July 2008. Data-determ...

This article reviews the major contributions of agricultural and resource economists in the area of econometrics over the past 100 years. Early on, a number of agricultural economists were in on the ground floor in terms of developing new econometric methods. Over time as the economics profession became more empirically oriented, agricultural and r...

The wholesale value of potted orchids (Orchidaceae) in the United States has risen 80% in the last decade to $126 million in 2007. However, market-related information concerning consumer demand is still very limited. The objective of this study was to identify consumer preferences affecting orchid purchases and the relative importance of different...

Monthly observations on prices from 10 weight/gender classifications of Nebraska beef cattle are studied in an error correction model (ECM) framework. This study attempts a replication of the 2003 paper on Texas prices by Bessler and Davis, where they find medium heifers (600–700 lb) at the center of price discovery. Using the ECM results Nebrask...

Consumer demand analysis attracts considerable attention. It remains an open question, however, whether estimating demand with aggregate data is reliable when disaggregate store-level data is given. Demand models may produce biased results when applied to data aggregated across stores with different pricing strategies. In this study, the graphical...

Recent studies and reports suggest that foreign aid/intervention has been somewhat futile in eradicating conflict. In this study, we develop a simultaneous donor/recipient model of foreign aid and terrorism. Thereafter, we extend our theoretical propositions through a machine learning algorithm of inductive causation. We find that terrorism increas...

Investigation into the relations between market fundamentals and US natural gas prices is carried out in the regime-switching framework. To test the hypothesis that US natural gas market may switch between two states of market: bullish market and bearish market, a 2-state regime-switching model with Markov transition chain is carried out. GARCH eff...

This paper reconsiders empirical evidence on relationships among variables related to corporate strategy, structure, and performance. Causal relationships among variables are modeled as directed acyclic graphs using PC-algorithm. Return on Assets appears to be determined by Advertising Intensity, Unrelated Diversification, R&D Intensity, and Organi...

Dynamic price information flows among U.S. electricity wholesale spot prices and the prices of the major electricity generation fuel sources, natural gas, uranium, coal, and crude oil, are studied. Multivariate time series methods applied to weekly price data show that in contemporaneous time peak electricity prices move natural gas prices, which i...

This study investigates the evolving pattern of the interdependence among selected Asian emerging markets and three major stock markets (Japan, UK and US). Using rolling cointegration methods and the recently developed algorithms of inductive causation, we found that time-varying cointegration relationships exist among these stock markets. The resu...

We investigate the finite sample performances of three consistent information criteria, Hannan and Quinn (HQ), Schwarz information criterion (SIC), and Posterior information criterion (PIC), in the selection of co-integrating rank, or in joint determination of the lag order and co-integrating rank of vector error correction models. No single approa...

For many decades, fresh fruits and vegetables enjoyed a reputation as the healthiest products full of essential vitamins, minerals, and other beneficial substances for a balanced diet. However, numerous recent food outbreaks associated with fresh produce have raised concerns on the mind of the consumer. Following an outbreak, consumers reduce their...

Statistical methods are used to study relationships between research expenditures (adjusted for inflation) made from producer checkoff programs and soybean yields and net revenues in the United States for the years 1978 – 2007. Results presented are for yield and net revenue data and research expenditures for the entire United States. We find that...

Replaced with revised version of paper on 09/29/09. Former title: Mergers, Price Competition for the U.S. Carbonated Soft Drink Industry

Recent advances in multiple time‐series analysis are discussed and applied to data from the U.S. hog market. Vector‐autoregressive and moving‐average representations are derived and interpreted with respect to implied dynamic relationships among the variables. Desprogrès récents dans l'analyse des séries temporelles multiples sont présentes el util...

This study uses an error correction model and directed acyclic graphs to investigate the dynamic structure of the budget deficit, private investment and economic growth of Taiwan over the period 1971-2004. Our findings indicate that the budget deficit, private investment and economic growth are cointegrated. The directed graph results show that the...

To date, mixed demand systems have been all but ignored in empirical work. A possible reason for the scarcity of such applications is that one needs to know a priori which prices and quantities are endogenous in the mixed demand system. By using a directed acyclical graph (DAG), causal relationships among price and quantity variables are identified...

Employing the error correction method and historical decomposition with direct acyclic graphs, we quantify the impacts of domestic and overseas animal disease crises on the Korean meat market. We have the following findings: (a) the market partially recovered 16 months after the domestic foot-and-mouth outbreak (FMD) in 2000, and 13 months after th...

Recent advances in modeling causal flows with time series analysis are used to study relationships among eight North American natural gas spot market prices. Results indicate that the Canadian and US natural gas market is a single highly integrated market. Further results indicate that price discovery tends to reflect both regions of excess demand...

This study investigates financial contagion among seven international stock markets around the October 19, 1987 crash. Building on a recent advance in vector autoregression analysis by [Swanson, N., Granger, C.W.J., 1997. Impulse response functions based on a causal approach to residual orthogonalization in vector autoregression. Journal of the Ame...

This paper studies the spatial price linkages in U.S. grain and transportation markets using cointegration analysis and algorithms of inductive causation on directed acyclic graphs. Transport costs and prices from alternative transportation modes are considered to provide a relatively comprehensive view of the interaction between grain and freight...

In this paper, composite forecasting is considered from a Bayesian perspective. A forecast user combines two or more forecasts of an operationally relevant random variable. We consider the case where outperformance is modeled as a realization from a multinomial process. The user has prior beliefs about the probability that a particular method outpe...

This article considers innovation accounting using an Error Correction Model and Directed Acyclical Graphs (DAGs) on 10 Global Industry Classification Standard (GICS) aggregations of daily US equity values over the years 1995 to 2003. The GICS equity aggregates studied are: Consumer Discretionary, Consumer Staples, Energy, Financials, Health Care,...

A theoretical model of the law of one price which allows for seasonality in transaction costs and supply and demand conditions between markets is developed. Bivariate three-regime threshold vector error correction models are applied to natural gas markets to examine seasonality in threshold levels. Results indicate that there are nonlinear adjustme...

This paper considers dynamic behaviors of returns on real estate, equity markets, and related macroeconomic variables. Using monthly data measured over the period 1971–2004, we find a single structural break in a multivariate time series model of returns on REITs, returns on equities, industrial production, aggregate price inflation, default risk,...

This research investigates various unresolved issues regarding futures markets, using formal methods appropriate for inferring causal relationships from observational data when some relevant quantities are hidden. We find no evidence supporting the generalized version of Keynes’s theory of normal backwardation. We find no evidence supporting the...

Average monthly price data from twelve hinterland markets and the Houston port price for wheat are studied in a cointegration framework using the Engle-Granger “two-step” procedure and Johansen's maximum likelihood procedure. Out-of-sample forecasts from an error correction model are compared to those from a vector autoregression fit to levels and...

Perhaps for the first time, this paper applies Johansen and Juselius’ methods of the cointegrated vector autoregression (VAR) model to a monthly US system of markets for soybeans, soy meal, and soy oil. Analysis of the error correction or cointegration space illuminates the empirical nature of policy-relevant market elasticities, and of effects of...

This article presents an analysis of the functioning of the staple food markets following privatisation and liberalisation in Mali. New econometric techniques are used to analyse how price changes are discovered and transmitted among spatially separated markets. Results provide empirical evidence that governments' concerns over privatisation are la...

The paper studies probability forecasts of inflation and GDP by monetary authorities. Such forecasts can contribute to central bank transparency and reputation building. Problems with principal and agent make the usual argument for using scoring rules to motivate probability forecasts confused; however, their use to evaluate forecasts remains valid...

Economic theory is replete with causal hypotheses that are scarcely tested because economists are generally constrained to work with observational data. This article describes the use of causal inference methods for testing a hypothesis that one random variable causes another. Contingent on a sufficiently strong correspondence between the hypothesi...

The 2005 food crisis centered in Niger received worldwide attention and extensive media coverage. Crops suffered from poor rainfall and were plagued by locusts throughout the growing season. Malnutrition flourished with the sudden disruption in food supplies. One-fifth of Niger’'s children suffered from moderate to severe forms of malnutrition b...

Because of the recent soaring petroleum price and growing environmental concerns, biodiesel has become an important alternative fuel. Biodiesel is the mono alky esters made from a vegetable oil, such as soybean or rapeseed oil, or sometimes from animal fats. The escalation in world petroleum price has stimulated the demand for biodiesel, which cons...

Directed acyclic graphs and multivariate time-series analysis are used to identify and measure the effect of lock delay on the upper Mississippi and Illinois Rivers grain barge rates. Lock congestion on these rivers and its potentially unfavorable impact on grain barge rates that link the Midwest US to lower Mississippi River ports are of great con...

This study investigates the relationship between consumer debt and aggregate economic activity based on time series methods and directed acyclic graphs (DAG). Quarterly US data, measured over the period 1980 to 2003, on consumer debt, gross domestic product (GDP), interest rates, housing starts, and domestic auto sales, are analysed in an Error Cor...

We propose to use the emerging method of directed graphs to study price/quantity endogeneity issues in empirical demand analysis. The approach is illustrated through the examination of U.S. meat consumption. We find that for two major meat products (beef and poultry), retail prices contemporaneously caused quantities consumed, thus were predetermin...

Combining recent advances in causal flows with time series analysis, relationships among 11 U.S. spot market electricity prices are examined. Results suggest that the relationships among the markets vary by time frame. In contemporaneous time, the western markets are separated from the eastern markets and the Electricity Reliability Council of Texa...

An efficient and reliable transportation system is important to the marketing of U.S. grain since transport costs often account for a significant portion of the grain price in destination markets. Changes in a mode's transportation rate may divert the grain flow and ultimately influence prices in origin and destination markets. The objective of thi...

The bank lending channel states that changes in monetary policy cause changes in bank loans thus causing changes in real income. This implies the Federal Reserve can influence real income by controlling the level of intermediated loans. We apply a new method to test for an operative bank lending channel in the transmission mechanism of monetary pol...

This paper applies a combined methodology of a recently developed directed acyclic graph (DAG) analysis with Johansen and Juselius' methods of the cointegrated vector autoregression (VAR) model to a monthly U.S. system of markets for soybeans, soy meal, and soy oil. Primarily a methods paper, Johansen and Juselius' procedures are applied, with a sp...

This paper explores the impact of BSE and FMD on retail, wholesale and farm level prices of Beef, Lamb, Pork and Poultry in short-term as well as long term for a period of time from January 1985 to December 2002. This period covers a most difficult time in the UK meat industry as BSE and FMD diseases were at their historical peak presence. The pape...

We explore empirically the incidence of price discovery for black pepper in the spot market and the nearby and first distant futures markets with October 2001 to February 2003 daily data from Kerala, India. Modern time series methods of cointegration and directed acyclic graphs show that price information is discovered in the futures market; eviden...

Since Quenouille's influential work on multiple time series, much progress has been made towards the goal of parameter reduction and model fit. Relatively less attention has been paid to the systematic evaluation of out-of-sample forecast performance of multivariate time series models. In this paper, we update the hog data set studied by Quenouille...

Time series methods and directed acyclic graphs are used to uncover the centre of price discovery in 10 weight/gender classes of feeder and fed cattle from cash markets in Texas, U.S.A. Heavy feeder heifers, animals sitting on a margin of feeding for meat or breeding for new stocks, are weakly exogenous in an error correction representation of thes...

Using directed acyclic graphs (DAGs) and error correction models, we study the dynamics of freight prices that comprise the Baltic Panamax Index (BPI), the index on which freight futures trading was based. The DAGs are used to make statements about the contemporaneous correlations between prices and allow us to address the construction of the data‐...

To date, mixed demand systems have been all but ignored in empirical work. A possible reason for the scarcity of such applications is that one needs to know a priori which prices and quantities are endogenous in the mixed demand system. By using a directed acyclical graph (DAG), causal relationships among price and quantity variables are identified...

Transportation rates are vital componenets in the structure of U.S. grain exports. In this paper we study the dynamic properties of corn and soybean prices, and barge, rail and ocean shipping rates using time series analysis on monthly 1992-2001 data. Using Error Correction Model and Directed Acyclic Graphs, we capture the interconnectivity between...

This paper demonstrates the application of a recently developed methodology, the combination of directed acyclic graphs (DAGs) with Bernanke structural vector autoregression (VAR) models, to model a system of U.S. commodity-related and value-added markets. As an example, the paper applies this methodology to a monthly system of three U.S. soy-based...

Advanced methods that combine directed acyclic graphs with Bernanke structural vector autoregression models are applied to a monthly system of three U.S. soy-based markets: for soybeans upstream and for the two soybean co-products soy meal and soy oil further downstream. Analyses of the impulse-response function and forecast error variance decompos...

This study examines the long-run information role of open interest in futures markets. It is found that open interest of the futures markets for storable commodities shares the same long-run information as the futures prices, but not for the nonstorable futures markets. Furthermore, the futures prices tend to drive open interest for storable commod...

The Brier score and a covariance partition due to Yates are considered to study the probabilistic forecasts of a vector autoregression on stock market returns. Probabilistic forecasts from a model and data developed by Campbell (1991) are studied with ordinary least squares. Calibration measures and the Brier score and its partition are used for mo...

Directed Acyclic Graphs (DAG's) and Error Correction Models (ECM's) are employed to analyze questions of price discovery between spatially separated commodity markets and the transportation market linking them together. Results from our analysis suggest these markets are highly interconnected but it is the inland commodity market that is strongly i...