Philip Hans Franses's research while affiliated with Erasmus MC and other places

Publications (435)

Article
We analyze the effectiveness of the legislative framework of the maritime industry developed by the International Maritime Organization (IMO), the International Labor Organization (ILO) and regional regulators and industry. With a unique combination of 310 time series using data of 44 years (1977–2020), we use 41 econometric models to highlight the...
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A typical feature of life cycles of rock bands is that they seem to consist of two distinct stages. A first stage associates with initial entry and a second stage seems to be related to more mainstream success. This paper proposes a simple model to describe these two stages in the life cycles. The model is put to an empirical test by analyzing the...
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Forecasting has always been at the forefront of decision making and planning. The uncertainty that surrounds the future is both exciting and challenging, with individuals and organisations seeking to minimise risks and maximise utilities. The large number of forecasting applications calls for a diverse set of forecasting methods to tackle real-life...
Article
Full-text available
Forecasting has always been at the forefront of decision making and planning. The uncertainty that surrounds the future is both exciting and challenging, with individuals and organisations seeking to minimise risks and maximise utilities. The large number of forecasting applications calls for a diverse set of forecasting methods to tackle real-life...
Article
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We propose a simple and reproducible methodology to create a single equation forecasting model (SEFM) for low-frequency macroeconomic variables. Our methodology is illustrated by forecasting annual real GDP growth rates for 52 African countries, where the data are obtained from the World Bank and start in 1960. The models include lagged growth rate...
Article
There are various reasons why professional forecasters may disagree in their quotes for macroeconomic variables. One reason is that they target at different vintages of the data. We propose a novel method to test forecast bias in case of such unobserved heterogeneity. The method is based on so‐called Symbolic Regression, where the variables of inte...
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This paper introduces to the literature on Economic History a measure of persistence which is particularly useful when the data are irregularly spaced. An illustration to ten historical unevenly spaced data series for Holland of 1738 to 1779 shows the merits of the methodology. It is found that the weight of slave-based contribution in that period...
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Many macroeconomic forecasts are the outcome of a judgmental adjustment to a forecast from an econometric model. The size, direction, and motivation of the adjustment are often unknown as usually only the final forecast is available. This is problematic in case an analyst wishes to learn from forecast errors, which could lead to improving the model...
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Historical time series sometimes have missing observations. It is common practice either to ignore these missing values or otherwise to interpolate between the adjacent observations and continue with the interpolated data as true data. This paper shows that interpolation changes the autocorrelation structure of the time series. Ignoring such autoco...
Article
Weekly box office revenues for motion pictures show a pattern where peak revenues often appear in the first week, and then new revenues slowly die out. This paper proposes a simple model to describe such box office revenues. The new model assumes that there are two types of adopters, with the first being the moviegoers who are aroused to go to a mo...
Article
This manuscript uses a global and comprehensive approach based on 1.14 million observations to investigate whether the effect of perceived corruption can be detected towards safety qualities of vessels. Since safety qualities of vessels are influenced by many factors and the effect of corruption can be confounded by their interactions, a multi-step...
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This paper deals with inferring key parameters on marketing response at a true high frequency while data are partly or fully available only at a lower frequency aggregate levels. The familiar Koyck model turns out to be very useful for this purpose. Assuming this model for the high-frequency data makes it possible to infer the high-frequency parame...
Article
For many countries, statistical information on macroeconomic variables is not abundant and, hence, creating forecasts for a key variable like inflation can be cumbersome. This paper addresses the creation of current year forecasts from a MIDAS regression for annual inflation rates in Suriname where monthly inflation rates are the explanatory variab...
Article
This study investigates manpower planning and the performance of a national call center for scheduling car repairs and responding to road interventions. We model the impact of advertising on the required capacity and develop a forecasting model for incoming calls, where the impact of direct-response advertising is considered. With the estimation re...
Article
In this paper, it is proposed to combine the forecasts using a simple Bayesian forecast combination algorithm. The algorithm is applied to forecasts from three non-nested diffusion models for S shaped processes like virus diffusion. An illustration to daily data on first-wave cumulative Covid-19 cases in the Netherlands shows the ease of use of the...
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Professional forecasters can rely on econometric models, on their personal expertise or on both. To accommodate for adjustments to model forecasts, this paper proposes to use Two Stage Least Squares (and not Ordinary Least Squares) for the familiar Mincer‐Zarnowitz regression when examining bias in professional forecasts, where the instrumental var...
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This paper proposes an alternative estimation method for cointegration, which allows for variation in the leads and lags in the cointegration relation. The method is more powerful than a standard method. Illustrations to annual inflation rates for Japan and the USA and to seasonal cointegration for quarterly consumption and income in Japan shows it...
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This note proposes time series models for data where the frequency changes over time. As an example, for many countries, in the past, real GDP growth was observed annually and since a few years or decades, the data are available per quarter. Modifying the time series models allows for the incorporation of these older annual data, without a need for...
Preprint
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My contributions to this voluminous publication can be found on pp 38-40 "The natural law of growth in competition" and on pp 169-170 "Dealing with logistic forecasts in practice"
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This paper examines economic growth in 52 African countries for 1961–2016 and seeks to find if there is common growth. As all African countries have their particular features, concerning climate, harvest, industry, size, politics, and infrastructure, and more, it seems best to rely on a non-parametric method. Dynamic Time Warping is such a convenie...
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This letter deals with a test on forecast bias in predicting independent binary outcomes, where the outcomes are either 1 or 0, and the predictions are probabilities. The test concerns two parameter restrictions in a simple logit model. Size-corrected power experiments show remarkable power.
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We propose to view social conflicts in Africa as having similarities with earthquake occurrences and hence to consider the spatial-temporal Epidemic Type Aftershock Sequence (ETAS) model. The parameters of this highly parameterized model are estimated through simulated annealing. We consider data for 2012 to 2016 to calibrate the model for four Afr...
Preprint
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There are various diffusion models for S shaped processes like virus diffusion and these models are typically not nested. In this note it is proposed to combine the forecasts using a simple Bayesian forecast combination algorithm. An illustration to daily data on cumulative Covid-19 cases in the Netherlands shows the ease of use of the algorithm an...
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This paper adapts the non-parametric dynamic time warping (DTW) technique in an application to examine the temporal alignment and similarity across economic time series. DTW has important advantages over existing measures in economics as it alleviates concerns regarding a pre-defined fixed temporal alignment of series. For example, in contrast to c...
Article
The current (as of 2012) denominational range of the Malaysian ringgit has banknotes of RM1, 5, 10, 20, 50 and 100, but no RM2. The previous range (1996) carried RM1, 2, 5, 10, 50 and 100, but no RM20. We compare the efficiency of these two ranges with a full range like the Euro has, that is, 1, 2, 5, 10, 20, 50 and 100. We estimate that if the Ban...
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Professional forecasters can rely on an econometric model to create their forecasts. It is usually unknown to what extent they adjust an econometric model-based forecast. In this paper we show, while making just two simple assumptions, that it is possible to estimate the persistence and variance of the deviation of their forecasts from forecasts fr...
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Each month various professional forecasters give forecasts for next year's real GDP growth and unemployment. January is a special month, when the forecast horizon moves to the following calendar year. Instead of deleting the January data when analyzing forecast updates, I propose a periodic version of a test regression for weak‐form efficiency. An...
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To create an estimable version for annual data of the hybrid new Keynesian Phillips curve, one needs an expression for the expectation of next year’s inflation. The rational expectations literature assumes that this expectation is equal to the realization in the next year and an associated forecast error. This paper argues that this assumption goes...
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Many forecasting studies compare the forecast accuracy of new methods or models against a benchmark model. Often, this benchmark is the random walk model. In this note, I argue that for various reasons an IMA(1,1) model is a better benchmark in many cases.
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This paper reconstructs annual inflation figures for China, for the period 1953–1978, where inflation concerns the Consumer Price Index (CPI). One alternative index and two new models are considered. The models associate CPI based inflation with the GDP inflator and with retail prices, for the years after 1978. A combination of the three ‘forecasts...
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The available aggregated data on the Atlantic slave trade in between 1519 and 1875 concern the numbers of slaves transported by a country and the numbers of slaves who arrived at various destinations (where one of the destinations is ‘deceased’). It is however unknown how many slaves, at an aggregate level, were transported to where and by whom; th...
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Two banknotes and two coins of the New Taiwan Dollar are infrequently (if at all) used in Taiwan when people make cash payments. This note examines the effect of this behavior on the efficiency of cash payments. The results are compared with the Euro, where the two highest and two lowest tokens are also rarely used. We find for Taiwan that ineffici...
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It is well known that a combination of model‐based forecasts can improve upon each of the individual constituent forecasts. Most forecasts available in practice are however not purely based on econometric models but entail adjustments, where experts with domain‐specific knowledge modify the original model forecasts. There is much evidence that expe...
Article
Volatility is an important metric of financial performance, indicating uncertainty or risk. So, predicting and managing volatility is of interest to both company managers and investors. This study investigates whether volatility in user-generated content (UGC) can spill over to volatility in stock returns and vice versa. Sources for user-generated...
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This paper introduces the idea to adjust forecasts from a linear time series model where the adjustment relies on the assumption that this linear model is an approximation of a nonlinear time series model. This way to create forecasts can be convenient when inference for a nonlinear model is impossible, complicated or unreliable in small samples. T...
Article
We present various stylized facts about annual CPI based inflation in 47 African countries. Some stylized facts concern time series properties for each of the series but also across series. To achieve a useful and relevant dataset, we impute all missing values in the sample 1960–2015 using a new method based on postage stamps prices. This results i...
Book
Cambridge Core - Econometrics and Mathematical Methods - Enjoyable Econometrics - by Philip Hans Franses
Article
We employ a simple method based on logistic weighted least squares to diagnose which past data are less or more useful for predicting the future course of a variable. A simulation experiment shows its merits. An illustration for monthly industrial production series for 17 countries suggests that earlier data are useful for the prediction in a crisi...
Article
The principal component regression (PCR) is often used to forecast macroeconomic variables when there are many predictors. In this letter, we argue that it makes sense to pre-whiten the predictors before including these in a PCR. With simulation experiments, we show that without such pre-whitening, spurious principal components can appear and that...
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For many developing countries, historical inflation figures are rarely available. We propose a simple method that aims to recover such figures of inflation using prices of postage stamps issued in earlier years. We illustrate our method for Suriname, where annual inflation rates are available for 1961 until 2015, and where fluctuations in inflation...
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Based on detailed shipping figures for Suriname’s main harbour in Paramaribo, we estimate the total shipments (in kilograms) of original and falsified medical products for 1996–2008 across five product categories. Using various time series techniques and diffusion models, we document that total cumulative shipments of falsified products make about...
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We examine the situation in which hourly data are available for designing advertising-response models, whereas managerial decision-making can concern hourly, daily or weekly intervals. A key notion is that models for higher frequency data require the intra-seasonal heterogeneity to be addressed, while models for lower frequency data are much simple...
Article
A new data collection method is put forward to measure daily consumer confidence at the individual level. The data thus obtained allow to statistically analyze the dynamic correlation of such a consumer confidence indicator and to draw inference on transition rates. The latter is not possible for currently available monthly data collected by statis...
Article
We personally interview thirteen board members of seven (out of the ten) companies listed at the Suriname Stock Exchange and ask questions about their past and current decisions and on their risk attitudes. Next, we correlate the answers to company performance in between 2003–2011, like earnings per share, stock returns, book value and market value...
Article
Many publicly available macroeconomic forecasts are judgmentally adjusted model‐based forecasts. In practice, usually only a single final forecast is available, and not the underlying econometric model, nor are the size and reason for adjustment known. Hence, the relative weights given to the model forecasts and to the judgement are usually unknown...
Article
There is ample empirical evidence that expert-adjusted model forecasts can be improved. One way to potential improvement concerns providing various forms of feedback to the sales forecasters. It is also often recognized that the experts (forecasters) might not constitute a homogeneous group. This paper provides a data-based methodology to discern l...
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We propose a new and simple methodology to estimate the loss function associated with experts’ forecasts. Under the assumption of conditional normality of the data and the forecast distribution, the asymmetry parameter of the lin–lin and linex loss function can easily be estimated using a linear regression. This regression also provides an estimate...
Article
This Research Note shows that classic composers created their best works when they were at a similar age when creators in other domains did their best work, namely when they were at an age that represented around 60% of their life span. This finding is very similar to earlier results for painters and authors.
Article
Hyndman and Koehler (2006) recommend that the Mean Absolute Scaled Error (MASE) should become the standard when comparing forecast accuracies. This note supports their claim by showing that the MASE fits nicely within the standard statistical procedures initiated by Diebold and Mariano (1995) for testing equal forecast accuracies. Various other cri...
Article
We develop Hawkes models in which events are triggered through self-excitation as well as cross-excitation. We examine whether incorporating cross-excitation improves the forecasts of extremes in asset returns compared to only self-excitation. The models are applied to US stocks, bonds and dollar exchange rates. We predict the probability of crashe...
Article
Televised political debates are the platforms for party leaders to outline their party’s political programs and to attack those of their political opponents. At the same time journalists who moderate the debates are testing the party leaders’ ability to clearly outline and defend their programs. Television audiences of election debates evaluate the...
Article
It is now widely understood that mobile phone use has beneficial effects on development in developing countries, but little is known about the effects at the household level. We examine the impact of mobile telephone use on household income using a unique cross-sectional data set from Uganda. We use a novel econometric technique to handle endogenei...
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Collectible postage stamp prices in the Netherlands witnessed a bubble in the late 1970s, while prices rapidly floored in the mid-1980s. We analyze 500 individual stamps prices (instead of a single index) to examine whether the bubble could somehow have been predicted and whether there were early warning signals. Also, we study whether the characte...
Article
We conjecture that an important driver of individual purchases of counterfeit products is cultural norms and values. To put this conjecture to an empirical test, we make use of the unique situation of Surinamese people who live in Suriname and in the Netherlands and who might share the same norms and values but certainly not their respective income...
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Corruption may lead to tax evasion and unbalanced favors and this may lead to extraordinary wealth amongst a few. We study for 13 countries 6 years of Forbes rankings data and we examine whether corruption leads to more inequality amongst the wealthiest. When we correct in our panel model for current and one-year lagged competitiveness and GDP grow...
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We propose a modeling framework which allows for creating probability predictions on a future market crash in the medium term, like sometime in the next five days. Our framework draws upon noticeable similarities between stock returns around a financial market crash and seismic activity around earthquakes. Our model is incorporated in an Early Warn...
Article
The empirical properties of stock returns are studied for ten companies listed at the Suriname Stock Exchange (SSE), which is a young and growing stock market. Individual stock returns are found to be predictable from the own past to some extent, but the equal-weighted index returns are not. Dynamic correlations with large Latin American stock mark...
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Crucial inference for the hierarchical linear model concerns the null hypothesis of no random slope. We argue that the usually applied statistical test suffers from the so-called Davies problem, that is, a nuisance parameter is only identified under the alternative. We propose an easy-to-implement methodology that exploits this property. We provide...
Article
We develop Hawkes models in which events are triggered through self as well as cross-excitation. We examine whether incorporating cross-excitation improves the forecasts of extremes in asset returns compared to only self-excitation. The models are applied to US stocks, bonds and dollar exchange rates. In-sample, a Lagrange Multiplier test indicates...
Article
We propose various specification tests for Hawkes models based on the Lagrange Multiplier (LM) principle. Hawkes models can be used to model the occurrence of extreme events in financial markets. Our specific testing focus is on extending a univariate model to a multivariate model, that is, we examine whether there is a conditional dependence betwe...
Article
An analysis of about 300000 earnings forecasts, created by 18000 individual forecasters for earnings of over 300 S&P listed firms, shows that these forecasts are predictable to a large extent using a statistical model that includes publicly available information. When we focus on the unpredictable components, which may be viewed as the personal exp...
Article
Using weekly data on the interest for 17 social media via Google trends and using quarterly data on actual users for 3 social media, it is reported in this letter that the life cycles of social media mimic those of durable consumer goods. On average, the popularity of social media peaks after 4 years since entry.
Article
This paper analyzes forecasts, for ten key annually observed economic variables for the Netherlands, created by the Netherlands Bureau for Economic Policy Analysis (CPB) for 1971-2007. These CPB forecasts are all manually modified model forecasts, where the model is a (very) large multi-equation macro model. The CPB forecasts are held against real-...
Article
We replicate the landmark study of Shafir, Diamond and Tversky (1997) to examine whether individuals in China are prone to money illusion. We find that money illusion is prevalent in China as well. Respondents in the Chinese sample are often somewhat more likely to base decisions on the real monetary value of economic transactions compared to respo...
Article
Time series with bubble-like patterns display an unbalance between growth and acceleration. When growth in the upswing is “too fast”, then soon there will be a collapse and the bubble bursts. Such time series thus shows periods where both the first differences and the second differences of the data are positive-valued and in unbalance. For a time s...
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This paper analyzes more than 30 years of rankings of the best 40 Dutch economists, and examines if performance in terms of weighted publications increased. One of the findings is that over time the differences between top-performers and those lower on the charts decrease, but also that the group of top-performers is small and persistent over the y...
Article
We propose a modeling framework which allows for creating probability predictions on a future market crash in the medium term, like sometime in the next five days. Our framework draws upon noticeable similarities between stock returns around a financial market crash and seismic activity around earthquakes. Our model is incorporated in an Early Warn...
Article
It is common practice to evaluate fixed-event forecast revisions in macroeconomics by regressing current revisions on one-period lagged revisions. Under weak-form efficiency, the correlation between the current and one-period lagged revisions should be zero. The empirical findings in the literature suggest that the null hypothesis of zero correlati...
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This Research Note proposes that modern art painters make their best works at the optimal moment in their lives, a moment that could then be associated with the Divine proportion (the Fibonacci phi). An analysis of 189 highest-priced works by as many modern art painters, comparing the moment of creation with their life span of these artists, yielde...
Article
Many macroeconomic time series variables show signs of periodicity, that is, seasonal heteroskedasticity and seasonally varying autocorrelation structures. This paper argues that these periodic properties could in part be due to data revisions in case such revisions follow a particular format. Periodicity is shown to appear when quarterly data are...
Article
Earnings management to avoid earnings decreases and losses implies that the time‐series properties of the last quarter in the fiscal year differ from those of the other three quarters. We propose a simple parametric methodology to diagnose such differences. Application to a random sample of 390 firms in the Compustat database gives strong evidence...
Article
Many managers have access to statistical model-based forecasts and can use these to create their own forecasts. To the analyst, who aims to evaluate forecast accuracy, it is usually unknown to what extent managers use those model forecasts. Moreover, in other situations the analyst may additionally not even have access to those model-based forecast...
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We determine whether statistical model forecasts of SKU level sales data can be improved by formally including past expert knowledge in the model as additional variables. Upon analyzing various forecasts in a large database, using various models, forecast samples and accuracy measures, we demonstrate that experts’ knowledge, on average, apparently...
Article
Duration intervals measure the dynamic impact of advertising on sales. To be more precise, the p % duration interval measures the time lag between the advertising impulse and the moment that p % of its effect has decayed. In this paper, we derive an expression for the duration interval for a dynamic model linking sales to advertising, and most impo...
Article
A Forecast Support System (FSS), which generates sales forecasts, is a sophisticated business analytical tool that can help to improve targeted business decisions. Many companies use such a tool, although at the same time they may allow managers to quote their own forecasts. These sales forecasters (managers) can take the FSS output as their input,...
Article
Earnings forecasts can be useful for investment decisions. Research on earnings forecasts has focused on forecast performance in relation to firm characteristics, on categorizing the analysts into groups with similar behaviour and on the effect of an earnings announcement by thefirm on future earnings forecasts. In this paper we investigate the fac...
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Using social network theory, we investigate buyers' preferences for specific patterns of relationships among buyers, intermediary vendors, and suppliers of complex products. Using a conjoint experiment with actual buyers of computer network equipment and services as subjects, we find strong evidence that buyers look beyond their dyadic interaction...
Article
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In this study we analyze daily data on television viewing in the Netherlands. We postulate hypotheses on supply and demand factors that could impact the amount of daily viewing time. Although the general assumption is that supply and demand often correlate, we see that for television this is only marginally the case. Especially diversity of program...
Article
To optimally schedule commercials for a car repair service, we investigate the impact of direct-response commercials on incoming calls at a national call center by using a unique hourly data set from a Belgium-based company. We address the question of whether advertising effects vary across the hours of the week and thereby provide opportunities fo...
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We present a meta-analysis of cycle periods in historical socio-economic data found in the K-wave literature. The literature on stochastic and deterministic cycles in variables such as the consumer price index, employment, interest rates, commodity prices, GDP, war and hegemony is huge and scattered. However our meta-analysis reveals various common...
Article
Macroeconomic forecasts are often based on the interaction between econometric models and experts. A forecast that is based only on an econometric model is replicable and may be unbiased, whereas a forecast that is not based only on an econometric model, but also incorporates expert intuition, is non-replicable and is typically biased. In this pape...
Article
Macroeconomic forecasts are frequently produced, widely published, intensively discussed and comprehensively used. The formal evaluation of such forecasts has a long research history. Recently, a new angle to the evaluation of forecasts has been addressed, and in this review we analyse some recent developments from that perspective. The literature...
Article
We propose a new and simple methodology to estimate the loss function associated with experts' forecasts. Under the assumption of conditional normality of the data and the forecast distribution, the asymmetry parameter of the lin-lin and linex loss function can easily be estimated using a linear regression. This regression also provides an estimate...
Article
We examine the impact of mobile telephone use on economic development of individual households. Unique cross-sectional data were collected in personal interviews with heads of households (N=196) in Uganda. Economic development is measured at the household level by the Progress out of Poverty Index. We find strong support that mobile phone use posit...
Article
Using a unique dataset collected through a well-established survey, which was carried out in China, we examine whether Chinese individuals are prone to money illusion. In contrast to the outcomes for US individuals, we find that the Chinese are more likely to base decisions on the real monetary value of economic transactions. We put these observed...
Article
A government’s ability to forecast key economic fundamentals accurately can affect business confidence, consumer sentiment, and foreign direct investment, among others. A government forecast based on an econometric model is replicable, whereas one that is not fully based on an econometric model is non-replicable. Governments typically provide non-r...
Article
We consider the estimation of probabilistic ranking models in the context of conjoint experiments. By using approximate rather than exact ranking probabilities, we avoided the computation of high-dimensional integrals. We extended the approximation technique proposed by Henery (1981)17. Henery , R. J. 1981 . Permutation probabilities as models for...
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Experts can rely on statistical model forecasts when creating their own forecasts. Usually it is not known what experts actually do. In this paper we focus on three questions, which we try to answer given the availability of expert forecasts and model forecasts. First, is the expert forecast related to the model forecast and how? Second, how is thi...