THE ISBA BULLETIN

Vol. 7 No. 3 September 2000

The official bulletin of the International Society for Bayesian Analysis

ISBAELECTIONS that the Nominating Committee email to [email protected], or nominate at least two ISBA by regular mail to Professor by John Geweke members for each vacant Valen Johnson, ISBA Treasurer, Chair, ISBA Nominating position. Consistent with this Institute of Statistics and Committee duty, the Committee has Decision Sciences, 223 Old [email protected] nominated two members for Chem Building, Box 90251, The nomination and election President-Elect, two members Duke University, Durham, NC procedures are specified in the for Executive Secretary, and 27708-0251, USA. ISBA constitution and bylaws. eight members for the Board of Ballots must be received by Consistent with these Directors. The names of the December 15, 2000, to be procedures, after consultation nominees, and a short statement counted. with the Board, ISBA President from each nominee, appear Phil Dawid appointed a elsewhere in this issue of the ' $ nominating committee. The Bulletin. The bylaws also Contents chair, ex-officio, was John provide for nomination by ➤ ISBA Elections Geweke, Past-President of ISBA. petition of the membership. ☛ Page 2 The other members of the Petitions require 30 names and Committee were Caitlin Buck, must be submitted to the ➤ Interview with Wilson Merlise Clyde, Petros Executive Secretary by October ☛ Page 7 Dellaportas, Pilar Iglesias, Peter 1. Mueller, Donna Pauler, and Luis For the first time this year, ➤ Bayesian history Pericchi. ISBA members will have the ☛ Page 9 This year, as is the case every opportunity to vote on line. ➤ Bayesians in Israel year, the membership of ISBA Each member who has provided ☛ Page 10 will elect a President-Elect. The an email address to the person elected this year will Executive Secretary will receive ➤ Bayesians teaching serve in that position in 2001, as an email message containing (1) ☛ Page 11 President in 2002, and as Past instructions for on line voting, President in 2003. The other two including a password, and (2) ➤ Software review elected ISBA officers are the the text of a paper ballot that ☛ Page 12 Treasurer and the Executive can be printed out, filled in, and ➤ Applications Secretary, each of whom serves mailed to the Executive ☛ Page 14 a three-year term. For Secretary. ISBA members who 2001-2003, the office of have not provided email ➤ Bibliography Executive Secretary must be addresses will receive a paper ☛ Page 18 filled. Every year, four of the ballot by regular mail. The ISBA twelve seats on the ISBA Board Treasurer, Valen Johnson, keeps ➤ Students’ corner of Directors become vacant and the official record of ☛ Page 20 must be filled. Board members conventional and electronic mail ➤ News from the world serve three-year terms. addresses. Changes in either ☛ Page 22 The Constitution provides kind of address can be made by & % ISBA Bulletin, September 2000 ISBA ELECTIONS

A WORDOFTHANKS A WORDFROM created in Brazil; it joins the THE EDITOR existing ones (Chile, India and by Philip Dawid South Africa). The decision was ISBA President by Fabrizio Ruggeri unanimously taken by 13 [email protected] ISBA Bulletin Editor Brazilian Bayesians who met I am sure that all of you who [email protected] during Sinape (Brazilian National Symposium of were at the ISBA 2000 meeting As mentioned in the previous in Crete would wish to join me Probability and Statistics), last issue of the Bulletin, we are July in Caxambu, Brazil. Other in expressing the Society’s gradually changing the fullest appreciation of the Bayesians agreed with the Editorial Board of the Bulletin. creation of the Chapter. The generosity of the following The first change will take place organisations, whose financial Chapter has decided to host the with the next issue when Dalene “First Latin-American Bayesian contributions helped to make Stangl, Duke University, will the meeting possible: Meeting”, very probably in replace Jim Albert as Associate January 2002. Please contact Editor of the Bayesian Teaching • Eurostat (co-sponsor) Sergio Wechsler at section. I wish to thank Jim for • National Science Foundation [email protected] for more his efforts in running the • ASA Section on Bayesian information on the Chapter. section: it was not an easy task! Statistical Science • The Professor Leonard J. I am glad to report that a new Savage Memorial Fund, Inc. ISBA chapter has been recently

INFORMATION ➤ Areas of Interest: Bayesian before the Royal Statistical ON CANDIDATES parametric and nonparametric Society; Excellence in inference and prediction, model Continuing Education Award President Elect uncertainty, hierarchical from the American Statistical models, Markov chain Monte Association for a short course David Draper Carlo methods, foundations of on Bayesian hierarchical applied statistics, quality modeling at the joint statistical assessment in health and meetings, 1997; Quantrell ➤ Affiliation and Status: education. Award for excellence in Currently I am Full Professor of undergraduate teaching, Statistics and Head of the ➤ Most Important Journals or University of Chicago, 1984. Statistics Group at the Books: Journal of the Royal University of Bath, UK. From Statistical Society, Series B and ➤ Previous Service to ISBA: January 2001 I will be Full A; Journal of the American Nominations Committee, 1998. Professor and founding Chair of Statistical Association; ➤ Services to other Societies: a new Department of Applied Statistical Science; Statistics in Associate Editor, Journal of the Mathematics and Statistics at Medicine; New England Journal American Statistical Association the University of California, of Medicine; Journal of the (both Theory and Methods and Santa Cruz, where I intend to American Medical Association; Applications and Case Studies) help create a fully-Bayesian Journal of Educational and and Journal of the Royal statistics group with emphasis Behavioral Statistics; Bayesian Statistical Society, Series B; on real-world scientific Statistics 6; and a book on American Statistical Association problem-solving. Bayesian hierarchical modeling award committee, W. J. Youden I will publish, probably with ➤ Web Page and e-mail Address: Prize; Editorial Board, Springer-Verlag, in 2001. www.bath.ac.uk/∼masdd/; ASA-SIAM Series on Statistics [email protected] ➤ Honors: Two Read Papers and Applied Probability.

2 ISBA Bulletin, September 2000 ISBA ELECTIONS

My view of ISBA 5,000 people, only hundreds of take some steps toward whom are at present members developing new Bayesian The success of the ISBA 2000 of ISBA. It is our job to increase teaching materials. World Meeting in Crete in the understanding of the rest of ➤ In the next several years ISBA May—with 127 invited talks, those people that Bayes can help 109 posters, and attendance by will have to decide on whether them do their jobs better and to publish a Bayesian journal. at least 100 people who were that membership in ISBA is a completely or relatively new to This is a potentially contentious good gateway to Bayes. Student issue, and one where both sides Bayes—demonstrates that the outreach is particularly Society is growing both in of the debate have clear points important—these are potential of merit: the principal numbers and in respect Bayesian colleagues for life—as throughout the statistical world. advantage is having something is strengthening our ties with tangible to offer as part of ISBA With the development of scientific societies in substantive Markov chain Monte Carlo membership; the main disciplines (such as medicine disadvantage is possible methods over the past decade, and the environmental sciences) Bayesians can finally compute marginalization (if such a where Bayes is already a journal succeeded in drawing in models of realistic presence or (more vitally) likely complexity, and this has led to the best Bayesian papers out of to be helpful but not yet the best journals, then how are an outpouring of collaborations established. with colleagues in other we to demonstrate by example disciplines, in which Bayesian ➤ Another form of outreach, to non-Bayesians how much our methods have helped to find more slow-moving but of even methods can offer them?). It is satisfying scientific and greater potential impact, is to not the job of the President Elect decision-making solutions. The re-examine the teaching of to decide issues like this best way to win new friends is statistics in universities and (thankfully); for what it’s worth, to show them that Bayes can primary/secondary schools with the information I have at help them do things they now with respect to Bayesian ideas present, the disadvantages of find difficult or impossible, and (in the schools) and methods (at creating a new hardcopy we can expect our successes in university). Developing Bayesian journal appear to me this regard to continue in the materials to teach probability to outweigh the advantages (but decade to come. and statistics early and often to I look forward to hearing, and Significant challenges remain, of students from the ages of 6 to 26 helping to stimulate, both sides course; three that seem high on has not traditionally been a of the discussion). If we decide the list are as follows. particularly glamorous way for not to go forward with a statisticians to spend their time. hardcopy journal it will be good ➤ Mike West pointed out at the This needs to change if we are to to supplement the current list of ISBA General Meeting in Crete help more people to see the membership benefits with other that, as much as our numbers value of our subject in their features, perhaps arrived at have grown in the past several lives and careers, and there is no after study of how other leading years, we are still well behind reason why subjective journal-less societies manage the ASA Section on Bayesian probability ideas cannot be their affairs. Statistical Science. I would try introduced alongside frequency If chosen as President Elect I to help ISBA make a big push notions from an early age. As would be honored to have a forward in membership, President Elect I would work to chance to help in addressing principally by means of establish a Teaching Committee these challenges and the other vigorous electronic outreach. to identify the current state of opportunities that await in The annual joint statistical play in statistics teaching in ISBA’s near future. It is a good meetings in America are schools and universities and moment to be a Bayesian. regularly attended by more than

3 ISBA Bulletin, September 2000 ISBA ELECTIONS

President Elect JASA, 1986-1992, Chair-Elect, international colleagues. But Chair, Past-Chair, Section on how do we extend these Rob Kass Bayesian Statistical Science, activities in our increasingly 1996-1998; Institute of electronic and individualized ➤ Affiliation: Carnegie Mellon Mathematical Statistics: environment? And how can we University. Program Secretary, 1990-1991, offer our services to a wider Executive Editor of Statistical group? In my new-found role as ➤ Current Status: Professor and Science, 1992-1994, Chair, a rare statistician in the large Department Head, Department Publications Committee, and growing field of brain of Statistics, and Faculty 1996-1997, Council, 1999-2002. sciences I have appreciated the Member, Center for the Neural value of electronic information, Basis of Cognition. My view of ISBA including journals, to those ➤ Web Page and e-mail Address: trying to get involved in another www.stat.cmu.edu/∼kass/; When, in a recent lecture, a area, and I have also recognized [email protected] political scientist described the the large numbers of skilled sharp decline in group activities data analysts, often serious ➤ Areas of Interest: Cognitive among U.S. citizens over the users of Bayes’ Theorem, in neuroscience; all aspects of past 25 years (I assume similar other domains. I would like to Bayesian inference. trends would be evident in see ISBA increase its electronic ➤ Most Important Journals and many other countries), he presence, and am currently Books: Annals of Statistics, intentionally (and thoughtfully) serving on two committees (web Biometrics, Biometrika, Journal grouped together organizations and publication committees) of the American Statistical such as the Elks, a patriotic that should help begin the Association, Journal of social club, with those such as process. We have often talked Neurophysiology, Journal of the the American Political Science about reaching out to people in Royal Statistical Society, Neural Association, citing their steady other disciplines. We must also Computation, Statistics in drop in membership. While this be attentive to the needs of the Medicine; Case Studies in decrease in civic involvement most junior members of our Bayesian Statistics, vols I-V, with provides a context for reported society. In both cases we should Constantine Gatsonis and difficulties in recruiting and offer support services (tutorials others; Geometrical Foundations retaining members of various and special discussion sessions) of Asymptotic Inference, with Paul professional societies, the while also making sure to invite Vos. speaker’s broad categorization such individuals to give talks at ➤ Honors: Elected Fellow of the served as a reminder that our meetings, and we should American Statistical Association professional societies like ISBA publish their papers. That is, and the Institute of are also, in fundamental ways, while we offer them our Mathematical Statistics. social organizations. Meetings knowledge, we should show and the Bulletin are central and that we want to learn from ➤ Previous Service to ISBA: First extremely important activities them, too. Bayesian methods Vice-President, 1994-1996; of ISBA, helping encourage in have caught on in a big way. We Board of Directors, 1998-2000. us a sense of common purpose are at an important point when ➤ Services to other Societies: and spirit; we are often we should do all we can to American Statistical envigorated, even inspired by foster interaction within, and Association: Associate Editor of the accomplishments of our expand, our intellectual world.

4 ISBA Bulletin, September 2000 ISBA ELECTIONS

Executive Secretary analysis, and dynamical current research interests systems and chaos. His include spatial modelling of Cindy Christiansen publications have appeared, environmental and among other places, in epidemiological data and other Cindy L. Christiansen (Ph.D. 92, Biometrika, the Journal of applications of Bayesian University of Texas at Austin) is Computational and Graphical hierarchical models in medical Associate Professor of Health Statistics, the American research, and she is part of the Services, Boston University Mathematical Monthly, the project team developing and School of Public Health, and Scandinavian Journal of promoting the WinBUGS Senior Statistician of Veterans Statistics, the Canadian Journal Bayesian software package. She Affairs Health Services Research of Statistics, and the Journal of has published in a variety of and Development, Center for Statistical Planning and journals including the Journal of Health Quality, Outcomes and Inference. He has served as the American Statistical Economic Research in Bedford Chapter Representative and Association, Journal of the Massachusetts (USA). President of the Columbus Royal Statistical Societ (Series A, Her research interests include chapter of the American Series B and Series C), and the development and Statistical Association. Statistics in Medicine, and has application of hierarchical, co-edited a book on “Spatial Bayesian, and prediction Board Members Epidemiology: Methods and models for health care and Applications”, published by health policy applications. Her Marilena Barbieri OUP in August 2000. She is work with Bayesian models and currently on the committee of methods has appeared in the Marilena Barbieri (Ph.D. ’92, the Environmental Statistics Journal of the American Universita` di Roma) is Associate Study Group of the Royal Statistical Association, the Professor of Statistics, Statistical Society, and will take Journal of the National Cancer Universita` “La Sapienza”, over as joint editor of the Institute, the American Journal Rome, Italy. Her main areas of Journal of the Royal Statistical of Public Health, the Annals of interest are Bayesian model Society (Series A) in January Internal Medicine, and other selection; time series analysis; 2001. statistical and health-related Bayesian computation. She has Eduardo Gutierrez-Pe˜na journals and books. published papers on several journals, including Biometrika, She was on the ISBA Eduardo Gutierrez-Pe´ na˜ is IEEE Transactions on Signal nominating committee in 1997, Researcher at the Department of Processing, Journal of the Italian on the program committee for Probability and Statistics, Statistical Society. She has the 1995 ISBA meeting in IIMAS, National University of written an “Introduction to Oaxaca Mexico, and was a Mexico. His main areas of MCMC methods” for the committee member of ISBA’s interest are: (a) the study of the Monograph Series of the Italian Council of Sciences in 1995. properties of Bayesian conjugate Statistical Society in 1996. She is families for exponential models, Steven MacEachern a Corresponding Editor of the and (b) the problem of model ISBA Bulletin. selection. He has published Steven MacEachern is an Nicky Best work in several journals, Associate Professor in the including the Journal of the Department of Statistics at The American Statistical Ohio State University Nicky Best (PhD 1994, Association, Biometrika, (www.stat.ohio-state.edu/~snm). Cambridge University) is a Scandinavian Journal of Steve’s main areas of interest are lecturer in biostatistics at the Statistics, Journal of Statistical nonparametric Bayesian Department of Epidemiology Planning and Inference, and methods, computational and Public Health at Imperial Test. methods, Bayesian data College, UK. Some of her (www.dpye.iimas.unam.mx/eduardo)

5 ISBA Bulletin, September 2000 ISBA ELECTIONS

Robert Kohn the wide range of topics that I inference and Decision-making have been working on. in econometrics; Development I have taken an interest in ISBA of computational techniques Robert received his PhD from since it was first proposed, and using Monte Carlo methods, in the Australian National as it has grown and matured I particular importance sampling University and is currently a have been pleased to take a and MCMC; Stochastic trends, Professor at the Australian more active role. I am currently cycles and volatilities in Graduate School of Vice Program Chair. (economic) time series; Neural Management, which is a joint networks; and Income school of the University of New Raquel Prado distribution analysis. He was South Wales and Sydney Fulbright Scholar at Harvard University. He currently holds University and Visiting the positions of PhD director Raquel Prado (Ph.D.’98, ISDS, professor at Duke University, and Associate Dean, Research. Duke University) is Assistant Cornell University; Stockholm His main contributions over the Professor at Departamento de School of Economics; University last 10 years have been in the Computo´ Cient´ıfico y of New South Wales; CORE, development of Bayesian Estad´ıstica and Centro de Catholic University of methods in time series analysis Estad´ıstica y Software Louvain-la-Neuve. He has and nonparametric regression. Matematico´ (CESMa), published in Econometrica, The He is currently working on Universidad Simon´ Bol´ıvar, Bayesian Statistics Volumes of applications of these methods in Caracas, Venezuela. Her main the Valencia Meetings; Journal Marketing and Finance. Robert research areas of interest of Econometrics; Econometric has published extensively in the include dynamic models, prior Theory; The Statistician; Journal Statistics literature. For a list of distributions for multiple time of Applied Econometrics; Robert’s publications see his series and non-stationary time Econometric Reviews, web site at series modelling, statistical Scandinavian Journal of www.agsm.edu.au/~robertk/. analysis of biomedical signals, Economics. For more details see: Robert is currently Associate wavelets and applied Bayesian www.few.eur.nl/few/research/ei/ Editor of JASA and the statistics. Her papers can be Australian and New Zealand found in Journal of the Marina Vannucci Journal of Statistics. American Statistical Association, Journal of the Tony O’Hagan Royal Statistical Society Series Marina Vannucci (Ph.D. 1996, C, Clinical Neurophysiology University of Florence, Italy) is and Bayesian Statistics 6. She is Assistant Professor of Statistics I am a Professor of Statistics at currently the Associate Editor at Texas A&M University. Her the University of Sheffield, UK. for the Section on Bayesian current main research interests I have been actively researching history of the ISBA Bulletin. are wavelet methods, Bayesian in the methodology of Bayesian (www.cesma.usb.ve/∼raquel) variable selection, statistical Statistics for over 25 years, computing and molecular having been a PhD student of Herman van Dijk biology. Recent publications Dennis Lindley in the early have appeared in Biometrika, 1970s. Since the late 1980s I have Journal of the Royal Statistical also been increasingly involved Herman van Dijk is professor of Society, Series B, and in developing applications of econometrics and director of the Bioinformatics. Further Bayesian methods. The papers Econometric Institute at information can be found at on my web site Erasmus University. His http://stat.tamu.edu/people/ (www.shef.ac.uk/~st1ao) show research interests are Bayesian faculty/mvannucci.html/.

6 ISBA Bulletin, September 2000 INTERVIEWS

SIMON WILSON about problems involving 5. You have done a lot of uncertainty. John Haslett, the work with engineers etc. by Michael Wiper professor of statistics here at Are there any special [email protected] Trinity, has also given me problems in getting invaluable support over the Bayesian ideas over to Simon Wilson is a lecturer in years. them? Do you find you have statistics in Trinity College De Finetti’s book was also to use different methods Dublin. He studied for his important when I first started to with practitioners from doctorate under Nozer learn about Bayesian ideas. For different fields? Singpurwalla and has me, he laid out clearly how one Many mechanical engineers continued to work on the use of should think about uncertainty. have a rather sketchy Bayesian methods in reliability. 3. What are the highlights knowledge of statistical He has recently had his first of your work so far? methods, and have not heard of book on software reliability I am quite proud of the book Bayesian statistics. They expect published, jointly authored with “Statistical Methods in Software me to give them a point estimate his ex PhD supervisor. Engineering” (Springer, New and maybe a confidence interval We e–mailed Simon a number of York, 1999) that I co-authored or do a t-test, and can be questions about his career and with Nozer and which was skeptical when I give them the Bayesian world in general. published last year. I think that something completely different! Here are his responses. we managed to convey the A useful analogy between Bayes 1. Why did you decide to message that Bayesian methods theorem and solving become a statistician? are relevant and practical for a deterministic systems of equations, with which engineers I had always enjoyed whole range of statistical problems in software work all the time, is to think of probability and statistics, but the likelihood as the solution to had never considered graduate engineering. I am building up a body of work on statistical the equations (observable given study. On finishing my first parameters) and the posterior as degree, I was going to become methods in fatigue and fracture of materials. This is an area that the functional inverse of that an actuary. Thankfully, out of (parameters given observables). the blue I got offered a greatly interests me and where I think there is a lot of good At the end of the day, engineers scholarship to study for a Ph.D., are very pragmatic and if I can in stochastic models for probability modelling and statistics to be done. show them that estimates and operations research, at George predictions are reasonable, they Washington University in 4. And your plans for the often accept them and trust to Washington DC. I decided to future? you that they are the result of a take it. My research has always been legitimate statistical procedure. And why Bayesian? application driven, something Later on you can start to talk about where these results have My supervisor at GW was that I plan to continue. I enjoy come from. Nozer Singpurwalla. I think taking problems from scientists I have worked with some that that is all I need to say! and engineers and seeing how contemporary statistical electrical engineers on signal 2. Statistically speaking, methods can be applied. Part of processing, and they have used who have had the most the fun is never knowing which Bayesian methods. They tend to important influences on branch of science your next think of things in a different you? problem is coming from. Also, I way from most Bayesian Nozer has of course influenced have found myself becoming statisticians, thinking less about me greatly, mainly through increasingly involved in spatial the philosophy and more about showing me that the Bayesian statistics of late. the usefulness of the approach. paradigm is the way to think

7 ISBA Bulletin, September 2000 INTERVIEWS

6. Maybe you could tell us putting more emphasis on approach. I then use lots of a bit about the Bayesian having good research to examples, starting with statistical scene in advance in the profession. I conjugate priors and simple Ireland? have worked in basic research discrete examples. I have an I would describe it as small but laboratories in France in the example of a simple “expert growing, perhaps just enough to past year, and I found a lot of system” of a car diagnosis tool, form an ISBA chapter! The last 2 excellent research being done in where there are 3 things that can appointments in my department collaboration with French go wrong and 4 symptoms, and have been Bayesians (my former industry, much more than we calculate student Cathal Walsh and occurs in Ireland. And the US? P(problem | symptom). Brendan Murphy, who finished Basically, a lot more money and And do you have any amusing up at Yale last year). I therefore opportunity! classroom moments you can collaborate with Anthony 8. What do you enjoy most tell us about? Quinn and Anil Kokaram in about your work? I once got a comment on a Electrical Engineering at Trinity I enjoy of course the research course evaluation sheet that College, who use Bayesian challenges, and the travelling said “the lecturer looks like approaches in signal processing. and socialising at conferences. Jarvis Cocker” (lead singer of Elsewhere in Ireland there are a Overall, I think that Bayesian the stupendous 90’s/00’s couple of statisticians who use statisticians have a good English indy band Pulp, famous Bayesian methods. That’s about lifestyle! for attempting to attack Michael it. In a country of 4 million, I And least? Jackson, ed.). I was flattered! suppose that’s not too bad. Teaching 200 engineers the t-test 10. What do you predict 7. Having studied in the at 5pm on a Friday afternoon. will be the changes in the States and visited next few years of Bayesian departments in various 9. Do you find that statistics? parts of Europe, do you students easily accept Bayesian ideas? Are there Since I started as a graduate find many differences in student 10 years ago, the big research, teaching etc.? any special tricks, examples etc. that make advance has been in Things that I like about Ireland things easier to explain? computational methods. I see are that the administrative load that continuing. on lecturers is not too bad. So far, I have only taught In many fields, Bayesian There is no research or teaching Bayesian methods to methods are becoming an assessment exercise, as exists in mathematicians. I try to set out accepted method to do things, the UK. In contrast to the US, Bayesian ideas by taking the rather than just a curious there is less emphasis on laws of probability as axioms. I alternative. That’s great but of research, although that is justify those axioms by using course there are dangers to our changing quickly. I have seen in scoring rules or the approach of credibility if we don’t do things the last 5 years a great increase Cox in his American Journal of right. The next few years may in the amount of money for Physics paper. They relate to show us how successfully we basic research, and that is also this development from axioms, can move into the mainstream. in contrast to the classical

BULLETIN BY E-MAIL SENDINGAMESSAGETO [email protected], SPECIFYINGTHE PREFERRED FORMAT (POSTSCRIPT, COMPRESSED POSTSCRIPTOR PDF)

8 ISBA Bulletin, September 2000 BAYESIAN HISTORY

THE SEMINARIN and leader of this Seminar. • “After the first few meetings of AYESIAN NFERENCE Through its meetings under the the Seminar, I raised the issue as to B I sponsorship of the National whether we needed a constitution IN ECONOMETRICS Bureau of Economic Research or a formal set of operating rules at AND STATISTICS (NBER) and the National our usual Saturday business Science Foundation (NSF), the luncheon. Some one immediately by Raquel Prado Seminar provided a forum for moved that this matter never be [email protected] the rapid development of brought up again, a motion that We present a brief re- Bayesian econometrics and was seconded and approved view of the history of the statistics. Attendance at these unanimously with the explicit SBIES. Most of the ma- meeting gatherings, which understanding that everyone was terial below was taken counted with the participation free to bring up issues at our from the Preface of the of statisticians, economists and semiannual meetings for book “Bayesian Analysis scientists of various disciplines, consideration and a vote.” in Statistics and Econo- ranged from a few dozen to • “At another Saturday business metrics: Essays in Honor over 100 participants. luncheon, someone proposed that of Arnold Zellner”, Wi- From the start of the Seminar SBIES sponsor a volume in honor ley 1996, edited by Donald there was an emphasis on the of George Barnard. Immediately, Berry, Kathryn Chaloner work of the new investigators, some one said, “We can’t do that. including those just completing and John Geweke1. He’s not a Bayesian.” Another graduate degrees. In 1977 the person responded, “Barnard is a focus on work at the graduate The first meeting of the Seminar great guy!” and that settled the level was formalized in the in Bayesian Inference and matter.” institution of an annual Leonard Econometrics (SBIE) took place • “Just before our meeting in J. Savage Award for an in Chicago, December 11-12, Caracas at the time of a military outstanding doctoral 1970. Since then and until coup, I e-mailed Luis Pericchi to dissertation in the area of October 1995, the Seminar - that find out if it was safe to have our Bayesian econometrics and changed its name to Seminar in meeting as planned. He wrote back, statistics. A list of the winners Bayesian Inference in don’t worry we shall be meeting in and those who received Econometrics and Statistics a place surrounded by the army. honorable mention from 1977 to (SBIES) in the 1980s - had Fortunately, the meeting took place date and details about the convened about twice yearly. one day after the military coup was award can be found at the ISBA After October 1995 the meeting put down and democracy was web site (www.bayesian.org). has taken place once yearly. The preserved. We all celebrated this As a result of the work of many last SBIES was celebrated at great victory for democracy in individuals participating in the Ohio State University in 1999. Venezuela at several grand SBIES meetings, five books Over the years, the Seminar has parties.” consisting of original scientific taken place in various locations • “The ITAM meeting in Mexico papers on Bayesian methods in the US and around the world, City in 1986 was a gala 15th and applications were including the ITAM gala 15th anniversary meeting. Enrique de produced. Each volume has anniversary meeting in Mexico Alba and his colleagues spread out been dedicated to an City in 1986 and meetings in the red carpet for us. To show our outstanding statistician (see Bangalore, India in 1988, Rio de appreciation, members of SBIES References). Janeiro, Brazil in 1990, Caracas, voted to present ITAM with a grant The following historical Venezuela in 1992 and a from the Savage Memorial Fund to anecdotes about the SBIES Riverboat on the Rhine in 1993, help build its collection of Bayesian meetings were kindly provided to mention just a few. works. On a visit to ITAM a few by Arnold Zellner: Arnold Zellner was the founder years ago, Enrique proudly showed

1Copyright °c 1996 John Wiley & Sons, Inc. Reprinted by permission of John Wiley and Sons, Inc.

9 ISBA Bulletin, September 2000 BAYESIAN HISTORY / ISRAEL me the impressive Bayesian References: by P. Goel and A. Zellner. North collection in a special section of Studies in Bayesian Econometrics Holland-Amsterdam. ITAM’s library.” and Statistics in Honor of Leonard At a meeting in the early 1990s, J. Savage (1975). Edited by S. Bayesian and Likelihood Methods the SBIES group voted to Fienberg and A. Zellner. in Statistics and Econometrics: explore the possibility of North-Holland, Amsterdam. Essays in Honor of George A. establishing an international Barnard (1990). Edited by S. Bayesian organization that lead Bayesian Analysis in Econometrics Geisser, J. Hodges, J. Press and to further steps leading the and Statistics: Essays in Honor of A. Zellner. North-Holland: creation of ISBA in 1992. Harold Jeffreys (1980). Edited by Amsterdam. Members of the SBIES played a A. Zellner. North-Holland, key role in the creation of the Amsterdam. Bayesian Analysis in Statistics and American Statistical Econometrics: Essays in Honor of Association’s Section on Bayesian Inference and Decision Arnold Zellner (1996). Edited by Bayesian Statistical Science in Techniques: Essays in Honor of D. Berry, K. Chaloner and J. 1992. Bruno de Finetti (1986). Edited Geweke. Wiley: New York.

BAYESIANS which the Bayesian approach is read at the annual meetings of IN ISRAEL used. These Bayesian papers are the Israeli Association of in diverse areas, such as Statisticians. Few rejected it on by Udi Makov econometrics, official statistics, philosophical grounds; many [email protected] reliability, actuarial science, voiced objections on grounds of discrete multivariate analysis, impracticality. This non-hostile Statistical research in Israel is image analysis- to mention only attitude gave rise to a slow carried out in seven research a few. penetration of Bayesian ideas universities. Three have The roots of the Bayesian into industry, resulting in separate departments of work by Israeli researchers can sporadic application of Bayesian Statistics (Jerusalem, Tel-Aviv be traced back to the 1960s ideas in several areas, such as and Haifa). While few when Ester Samuel-Cahn (a reliability, image analysis, individual researchers are truly student of H. Robbins) wrote financial markets and more. Bayesian, most of the pioneering papers in the field of The advances in Bayesian researchers regard Bayesian empirical Bayes and decision statistics in the last decade make Statistics as yet another theory. At that time, while it much more appealing to methodology which can be Bayesians and non-Bayesians in practitioners and researchers employed whenever suitable. the UK held at each other’s alike, and it is therefore Indeed, the publication list of throat, the early Bayesian expected that Bayesian statistics Israeli statisticians looks very papers were accepted here as a would enjoy increased much like the table of content of matter of course. Even in the popularity here. A major any leading statistical journal early days of Bayesian statistics meeting of ISBA in Israel could with a mix of subjects and a in Israel, there were no heated have a significant impact on the certain proportion of papers in debates around Bayesian papers community.

10 ISBA Bulletin, September 2000 TEACHING

BAYESIAN questions of interest. Stern next paper demonstrated that it is COMMUNICATION:A discussed how Bayesian often easy to introduce Bayesian REPORTFROM JSM thinking is hard to explain. The thinking to people who are not 2000 interpretation of probability is trained in classical methods. hard, especially for people John Geweke, in his paper by Jim Albert trained in frequency probability “Embedding Bayesian Tools in [email protected] – people don’t understand what Commercial Software” (joint a subjective probability interval with William McCausland), This year I had the pleasure of is communicating. The role of described the use of the BACC organizing and attending a priors is an important issue. The (Bayesian Communication session at the 2000 Joint use of subjective priors is Software) in communicating Statistical Meetings in August worrisome and noninformative Bayesian inference. Bayesians on the general topic of priors are sometimes not typically fit models by “Bayesian Communication”. well-defined. Also people used performing high-dimensional The idea of this session is to to testing hypotheses from a simulation algorithms, called by discuss ways of introducing classical perspective have Geweke as “posterior Bayesian thinking to students difficulty understanding the simulators”. In the and applied scientists. The three different Bayesian approach to mathematical software system speakers, Hal Stern, Peter Thall, testing. Stern concluded by MATLAB, Geweke describes the and John Geweke gave talks emphasizing the need to output of a particular MCMC that addressed this theme from demonstrate that benefit of algorithm in terms of a different perspectives. Bayesian procedures by “posterior simulation matrix” Hal Stern has experience in showing that they have good which can be given to the reader Bayesian communication, both repeated-sampling properties. who is interested in fitting the as a textbook author and as a He believed that the outlook for model. The reader may want to consultant at Iowa State. In his an increasing use of Bayesian perturb the model by choosing a paper “The Basics of Talking procedures is good. different prior or omitting Bayesian Statistics”, Stern first Peter Thall, in his paper observations. Alternatively, the outlined the advantages of “Bayesian Methods in Early reader might want to perform a Bayesian methods: they make Phase Clinical Trial Design” different inference or prediction explicit use of probability, they described the success in than what was presented in the make developing and extending applying the Bayesian paradigm original study. All of these new models a natural process, they in clinical trials. These trials are analyses can be easily incorporate prior information, often very complex, and interim performed from the posterior and they have computational decision-making is an essential simulation matrix. This BACC benefits. Then Stern discussed component of these designs. software system has the two examples in detail where Prior information plays a critical potential of communicating a Bayesian methods are very role in this setting, and Bayes complete Bayesian analysis to a useful. In a variance component rule provides a convenient way wide audience with different problem in the context of animal of sequentially updating beliefs interests with regards to breeding, the classical approach given new data. Also, clinical modeling and decision-making. is difficult to apply. In contrast, oncologists think and act like In the discussion of this a Bayesian model is simple to fit Bayesians. A key aspect is the session, John Deely stated that using MCMC methods. construction of the prior he believed that one of the key Although Bayesian methods distribution, and Thall advantages of the Bayesian requiring more thinking about described the use of conjugate viewpoint was that all the model and the “correct” priors. Doctors are relatively uncertainty should be described estimator, it provides flexible poor in remembering probabilistically. He thought inference and provides direct information, and so data-based that it was especially important answers to the inferential priors are typically used. This to keep the Bayesian model

11 ISBA Bulletin, September 2000 TEACHING / SOFTWARE simple; otherwise people will same thing will only confuse communication skills have to doubt the validity of the our non-Bayesian audience. continually improve at teaching Bayesian inferential Generally, the session was and consulting levels to conclusions. Also, we should be well-attended and got positive facilitate the increasing careful about the jargon we use feedback. It’s clear from these application of Bayesian – different terms used for the presentations that our Bayesian thinking.

MATLAB CODEFOR the different submodels, or at Bayesian model averaging BAYESIAN VARIABLE least for a restricted set of them prediction on a set of future data SELECTION in the case of high dimensions, using a specified number of the i.e. for large p. The weights of most probable visited models. by Marina Vannucci the average are determined as Functions in bvsme.tar still use [email protected] the posterior probabilities of the conjugate priors on the single models. parameters of the regression Functions in bvsgs.tar perform model but with a g-prior for the This software provides a set Bayesian variable selection as regression coefficients and a of Matlab functions that described in Brown, Vannucci, more flexible Beta-Binomial perform Bayesian variable Fearn (1998a), using conjugate prior on the selecting binary selection in a multivariate priors on the parameters of the vector. Also, the posterior regression setting. There are regression model and distribution is searched via a different sets of functions independent Bernoulli priors on Metropolis algorithm that currently available, the p entries of the selecting moves through a sequence of implementing different binary vector. The posterior models generating a new approaches and models for the distribution is explored via a candidate by randomly variable selection problem: Gibbs sampler that moves from modifying the current model bvgs.tar, bvsme.tar, bvssa.tar a model to another by via deletion, addition and (written by Marina Vannucci) generating componentwise swapping moves. This set of and bvsgs i.tar, bvsgs g.tar, from the full conditional functions was used to produce bvsgs gi.tar (written by distributions. The input of the the results of Brown, Vannucci, Veronique Delouille and Marina main function bvsgs sp.m Fearn (1998b). The input of the Vannucci). requires the data and all the main function bvsme gp.m Consider the multivariate hyperparameter specifications, requires the data and the regression model with p it asks for possible permutations hyperparameter specifications, regressors, q responses and n of the data and for the initial it asks for possible permutations observations, where p can Gibbs parameters (initial of the data and for the largely exceed n. Bayesian number of variables included, Metropolis parameters (initial variable selection approaches number of iterations). As number of variables included, use a latent vector with p binary output, it returns the list of all probabilities of entries to identify the different visited models and their relative deletion/addition and swap submodels. The marginal posterior probabilities, the moves, total number of posterior distribution of the normalized ordered relative iterations) and returns a similar binary vector is derived and, in probabilities of distinct visited output to that of the function high dimensions, Markov chain models and the marginal bvsgs sp.m. Monte Carlo algorithms are probabilities of inclusion of the Both models implemented in used to sample from this single variables. Distinct visited bvsgs.tar and bvsme.tar require posterior distribution. Also, models and their corresponding the user to pre-process the data prediction can be done by posterior probabilities can then by centering the training data computing a weighted average serve as input to the function and subtracting the training of the predictive distribution for pbvs sp.m that performs means from the future data.

12 ISBA Bulletin, September 2000 SOFTWARE

Functions in bvsgs i.tar, Vannucci (1999), attaching costs the number of explanatory bvsgs g.tar and bvsgs gi.tar to the inclusion of the single variables has been as high as implement Bayesian variable variables. A non-conjugate 350, though bvsme.tar, with the selection using Gibbs sampler in proper prior distribution is used g-prior and a Metropolis search, a multivariate regression with for the regression parameters may handle a total up to 700. A related predictors and with a and a measure of predictive fast updating algorithm is prior on the latent binary vector performance is computed for currently under study that will suitably modified to allow the different models. A lead to revised code capable of different combinations of simulated annealing algorithm handling much larger datasets. predictor terms. Specifically, is used to optimise the expected Code and related bvsgs i.tar allows for main utility in the case of many documentation can be effects and two-way interaction regressors. The input of the downloaded from and quadratic terms, bvsgs g.tar main function bvs sa.m requires http://stat.tamu.edu/ for main effects and “grouped” the data and parameter ~mvannucci/webpages/codes.html variables (sets of variables to be specifications, it asks for the and should be distributed for included or excluded as a annealing parameters (initial non-commercial purposes only. group), and bvsgs gi.tar for main temperature, updating All the code requires Matlab 5 effects and both interactions and temperature parameter, by MathWorks. grouped variables. The code probabilities of moves and automatically generates stopping parameter) and References: BROWN, P. J., FEARN, T. and interaction terms for returns the list of visited models VANNUCCI,M. (1999). The choice independent and grouped and their prediction costs. The of variables in multivariate variables and centers responses model with minimum cost can regression: a Bayesian and explanatory variables. The then be used to do least squares non-conjugate decision theory prior on the latent binary vector and Bayes predictions via approach. Biometrika, 86(3), 635-648. allows for two different forms of pbvs sa.m. inclusion of interaction terms, All sets of functions here BROWN, P.J., VANNUCCI,M. and one if both variables of the described have been used in FEARN, T. (1998a). Multivariate interaction are also included, calibration problems for the Bayesian variable selection and prediction. Journal of the Royal the other, if at least one of the prediction of the chemical Statistical Society, B, 60(3), 627-641. two variables is included. composition of a sample from Functions in bvssa.tar implement its near-infrared spectrum BROWN, P.J., VANNUCCI,M. and an alternative approach to the comprising as many as 700 FEARN, T. (1998b). Bayesian variable selection problem that frequencies. Training samples wavelength selection in uses Bayesian decision theory as available usually had few multicomponent analysis. Journal of described in Brown, Fearn, observations. In applications, Chemometrics, 12, 173-182.

ISBA/SBSSARCHIVEFOR ABSTRACTS All authors of statistics papers and speakers giving conference presentations with substantial Bayesian content should consider submitting an abstract of the paper or talk to the ISBA/SBSS Bayesian Abstract Archive. Links to e-prints are encouraged. To submit an abstract, or to search existing abstracts by author, title, or keywords, follow the instructions at the abstract’s web site, www.isds.duke.edu/isba-sbss/

13 ISBA Bulletin, September 2000 APPLICATIONS

BAYESIAN generate such forecasts vary at attributes, and performance of FORECASTINGOF different stages. Initially, in the the new movie in the domestic NEW PRODUCT market evaluation stage, movie market. Just prior to the PERFORMANCE studios have yet to pick a international launch, the studios particular movie and have not have finalized the marketing by Pradeep K. Chintagunta decided which markets to enter. mix variables for international pradeep.chintagunta@ The only information available markets for the initial week and gsb.uchicago.edu at this stage is the performance forecasts need to be based on and Ramya Neelamegham of previous movie releases in this additional information. [email protected] different markets. We refer to Despite the importance of such data on previous releases forecasts at these different Application of Bayesian as the historical database. The stages, the industry struggles to methods may help provide historical database can be used understand and predict sales of the whole picture! to generate initial base forecasts. new movies in domestic and After production of a specific overseas markets. When a firm introduces a new movie, decision- makers need We develop a Bayesian product (or service), it has at its sales forecasts in order to make modeling framework that disposal, several pieces of market entry and mix decisions. predicts first week viewership information available to it. Because the attributes of the for new movies in both These include the nature and new movie, such as genre, domestic and several characteristics of the new presence/absence of major stars international markets. We focus product, the performance of become known at this stage, on the first week because similar products previously they can be combined with the industry players involved in released, etc. The question the historical database to generate international markets (studios, firm faces is: how can it an updated forecast. distributors and exhibitors) are effectively utilize the different Immediately prior to domestic most interested in these information sources that are launch of a new movie, the predictions. We draw on available to generate reliable studios have determined the existing literature on forecasting new product performance marketing mix for the domestic performance of new movies to forecasts? Further, how can it market. Thus, data on formulate our model. account for varying information marketing mix variables such as Specifically, we model the availability at different stages of the number of screens in the number of viewers of a movie in the new product launch and domestic market can be a given week using a Poisson generate forecasts at each stage? incorporated to generate a count data model. The number The purpose of this research is pre-launch forecast for the of screens, distribution strategy, to address these questions in domestic market. These movie attributes such as genre two different contexts. The first forecasts are inputs for and presence/absence of stars pertains to the sequential marketing mix decisions for the are among the factors modeled launches of motion pictures in entire life cycle of the movie. to influence viewership. We international markets. The Post-domestic release, forecasts employ a hierarchical Bayes second, which is still work in of movie performance in formulation of the Poisson progress deals with technology international markets are model that allows the products. required to finalize decisions determinants of viewership to Companies operating in the such as distribution strategy vary across countries. We adopt motion picture industry require and release schedule in these the Bayesian approach for two forecasts at different stages of markets. At this stage, reasons. First, it provides a the movie launch process to aid decision-makers have an convenient framework to model decision making and the information set that consists of varying assumption of information sets available to the historical database, movie information availability.

14 ISBA Bulletin, September 2000 APPLICATIONS

Specifically, it allows us to make number of screens on which a information sources to make forecasts by combining different movie is released is the most new product forecasts in sources of information such as important influence on domestic and international domestic and international viewership. Further, we find markets. Our results underscore market-specific data. Second, that local distribution improves the theme that each movie is this methodology provides us movie sales internationally in unique as is each country, and with the entire distribution of contrast to the domestic market. that viewership results from an the new movies performance We also find evidence of similar interaction between product forecast. Such a predictive genre preferences in and market. Hence, the motion distribution is more informative geographically disparate picture industry should use than a point estimate and countries. We find that the both product-specific as well as provides a measure of the proposed model provides market-specific information to uncertainty in the forecasts. accurate forecasts at the movie- make new movie performance We propose a Bayesian country level. Further, the forecasts. prediction procedure that model outperforms all the The research pertaining to provides viewership forecasts at extant models in the marketing technology products such as different stages of the new literature that could potentially digital cameras, camcorders, etc. movie release process. The be used for making these is cast in a similar vein. The methodology provides forecasts forecasts. A comparison of root major complications caused by under a number of information mean square and mean absolute such products are twofold. First, availability scenarios. Thus, errors for movies in a hold out product attributes are evolving forecasts can be obtained with sample shows that the model constantly and must themselves just information from a that combines information be forecast before trying to historical database containing available from the different forecast the performance of a data on previous new product sources generates the lowest product. The second is that launches in several international errors. A Bayesian predictive given the newness of the markets. As more information model selection criterion category, consumer preferences becomes available, the corroborates the superior are still evolving. This forecasting methodology allows performance of this model. We necessitates dynamic models for us to combine historical demonstrate that the Bayesian forecasting the sales of such information with data on the model can be combined with products. performance of the new product industry rules of thumb to Readers interested in the in the domestic market and generate cumulative box office research on movies are directed thereby make forecasts with less forecasts. to the paper published in uncertainty and greater In summary, this research Marketing Science (1999), volume accuracy. demonstrates a Bayesian 18, issue 2, pages 115 to 136. Our results indicate that for all modeling framework that the countries in the data set the allows the use of different

ISBA WEB SITE HAVE YOU CHECKED THE ISBA WEB SITE LATELY? IFNOT, TRY www.bayesian.org

ANDLOOKFORTHEMOSTRECENTNEWSFROMTHE BAYESIAN WORLD

15 ISBA Bulletin, September 2000 APPLICATIONS

BAYESIAN “BETTING” minimal policy objective in one currency and lending it WORLDWIDE requirement making investment in another). In the midst of the management, in principle, a ERM (Exchange Rate by Jos´eM. Quintana Bayesian endeavor. Mechanism) the expected [email protected] Furthermore, the five forward cash flow was assumed Applying Bayesian dy- investment management to be the corresponding interest namic global asset alloca- functions (setting investment rate differential. This was, tion strategies to outper- policy; performing security admittedly, a na¨ıve model form financial benchmarks analysis; constructing a assumption, but it was a very under risk control. portfolio; revising a portfolio; effective one as well. The and evaluating the performance associated risk model The title above was intended for of the portfolio) by Sharpe, et al. component was essentially the an article (Putnam and (1999) seem to call for a one described in the Quintana, 1993). The paper Bayesian analysis. Arguably, aforementioned paper. This appeared with a different name there is no other field of strategy was implemented due to concerns from the upper application, with the exception during 1990-1991. management regarding possible of war, where the flow of After I moved to the Global Risk client reaction. Yet, arguably, I consequences (when making Management sector of The have been engaged for many sequential decisions under Chase Manhattan Bank, the years in “Bayesian ‘betting’ uncertainty) can be so strategy was expanded to worldwide.” drastically apparent. What follows is a personal account of include future contracts on Investment management is a ten-year experience using stock indices and government naturally suited for the Bayesian weapons in the global bonds. In addition, the expected application of the Bayesian financial markets warzone. return component of the model paradigm: First, the modern formulation of the three asset foundation of subjective My first assignment for a money classes was enhanced to include probability based on betting management firm (Chase several explanatory variables schemes can be traced all the Investors) was to build a risk with dynamic sensitivities. This way back to the definition of management system for strategy was implemented “The probability of any event is...” constructing currency portfolios during 1992-1994. given, albeit apologetically, by with high expected return and The next major improvement the Reverend Bayes, 1763. low volatility (standard was the introduction of a data Second, the cynical sometimes deviation). My entrance ticket pooling (shrinkage) structure assert that the greatest casinos to Wall Street was a paper into the expected excess return of the world are the financial (Quintana and West, 1987) on a component of the model `ala markets. Ironically, from a dynamic variance-covariance Zellner, et al. (1991). The formal technical perspective, model, based on information financial strategy was trivially this view has certain merit since discounting, applied to generalized to outperform other the difference between international exchange rates. benchmarks (e.g., the S&P 500 investing, speculating and The financial strategy was to index) simply by investing the gambling boils down to shades outperform a cash deposit by capital in the benchmark rather of variation in the objectives investing the capital directly in than in a cash deposit. Several (e.g., the fear and greed tradeoff cash and generate excess returns investment programs following attitude and the time horizon). via an overlay portfolio of forward currency contracts (the this strategy were implemented Surely avoiding a Dutch book future cash flow of a forward is at Bankers Trust Company (being a sure loser) must be a equivalent to borrowing money during 1995-1997.

16 ISBA Bulletin, September 2000 APPLICATIONS

The structure of the risk Robertson to reduce in Biometrika, 45, 293-315, (1958), component of the model was significantly their activity. with a biographical note by enriched with the inclusion of a G.A.Bernard). global risk parameter to model A multivariate generalization of MARKOWITZ,H.M. (1987). global financial shocks Shephard (1994) formulation allows for a full-blown Bayesian Mean-Variance Analysis in Portfolio spreading within and across Choice and Capital Markets. Basil stochastic variance-covariance asset classes. The current Blackwell Inc. generation of these dynamic system equation for the multiple-factor models has been multivariate risk model PUTNAM,B. and QUINTANA,J.M. running by the GDAA (Global component. This form, (1993). Bayesian Global Portfolio Dynamic Asset Allocation) according to our internal Management. ASA, Proceedings of group at CDC Investments, research, is fully equivalent to the Section on Bayesian Statistical New York, since 1997 driving the version based on the Science. information discounting artifice the core asset allocation of QUINTANA,J.M. and WEST,M. separately managed futures and overcomes the limitations (1987). Multivariate Time Series accounts, offshore funds, of Uhlig’s (1994) approach. The Analysis: New Techniques Applied mutual funds, and proprietary dynamic investment strategy, as to International Exchange Rate trading. a whole, follows the general Data. The Statistician, 36, 275-281. Bayesian scheme, a dynamic The performance of the programming version of the SHARPE, W.F., ALEXANDER,G.J. corresponding investment expected utility maximization and BAILEY, J.V. (1999). programs, running at different paradigm, outlined by Investments. Prentice Hall. institutions over a ten-year Markowitz (1987). Not only is SHEPHARD,N.G. (1994). Local period, as a whole have met the process Bayesian, but there Scale Models - State Space their objectives to outperform is an unyielding effort made to Alternative to integrated GARCH benchmarks under risk control. assimilate the latest Bayesian Processes. Journal of Econometrics, Remarkably, the strategy has technology. 60, 181-202. survived, with relatively minor scratches, many financial shocks In conclusion, although betting UHLIG,H. (1994). On Singular Wishart and Singular Multivariate induced by the Persian Gulf might not be a good thing, Bayesian “betting” has been Beta Distribution. Annals of crisis in 1990-91; the collapse of Statistics, 22, 395-405. the ERM in 1992; the Fed efficiently driving the asset tightening in 1994; the Asian allocation of hundreds of ZELLNER,A.,HONG,C. and MIN, crisis in 97-98; the related millions of dollars worldwide C. (1991) Forecasting Turning Russian debt and LTCM (Long for over a decade. Points in International Output Term Capital Management) References: Growth Rates using Bayesian meltdown also in 1998; and the BAYES, T. (1763). An Essay towards Exponentially Weighted subsequent puzzling behavior solving a problem in the doctrine of Autoregression, Time-varying of global financial markets that chances. Phil. Trans. Roy. Soc., 53, parameter, and Pooling Techniques. persuaded hedge fund legends 370-418, and 54, 296-325. (Reprinted Journal of Econometrics, 49, 275-304. such as George Soros and Julian

17 ISBA Bulletin, September 2000 BIBLIOGRAPHY

FINANCE prior standard deviations the involving the MSCI indices of optimal portfolio weights in North America, Europe and by Siva Sivaganesan foreign stocks in a two-asset Pacific. As a benchmark the [email protected] portfolio (with the US) is MSCI world index is used and it In this issue we focus on calculated: Strong priors lead to is shown that the Bayes Bayesian applications in smoother weight s over time. portfolio is up to 3.5% points the area of Finance. We • N.G.POLSONAND B. V. higher, depending on the time have attempted to cover TEW(2000). Bayesian portfolio range. Monthly time series many of the important ref- construction: An Empirical between February 1990 and erences. Our apologies Analysis of the S&P 500 index September 1999 are used. for any inadvertent omis- 1970-1996. Journal of Business & • F. R. STAMBAUGH(1997). sions. Economic Statistics, vol. 18, no. 2, Analyzing investments whose 164-173. histories differ in length. This paper applies a factor Journal of Financial Economics, • C.R.HARVEYAND G. hierarchical regression model no. 45, 285-331. ZHOU(1990). Bayesian for the problem of portfolio This paper compares portfolio inference in asset pricing tests. selection. The efficient selection from a Bayesian and a Journal of Financial Economics, mean-variance portfolio is classical point of view for time no. 26, 221-254. calculated using the predictive series which differ in length. It The paper derives the posterior variance -covariance matrices. derives the Bayesian predictive odds ratio for testing the A Gibbs sampling algorithm is density for the one-step ahead Sharpe-Lintner CAPM model suggested for computing the returns and the first and second (i.e. if the intercept is zero). The covariance matrix with different moment of that distribution. It test is applied for 12 industry historical time series lengths. also describes the Anderson portfolios with monthly data The Bayesian portfolio (1957) method for computing from 1927-1987. Also the outperforms the S&P500 index the maximum likelihood simultaneous Bayesian on average by 1.8% points. estimates of a multivariate credibility regions for the • A. P. FROSTAND E.J. normal distribution with intercepts are presented. For the SAVARINO(1986). An Empirical ’multiple starting dates’. The Cauchy and the normal prior Bayes Approach to Efficient paper compares the results for posterior probabilities are Portfolio Selection. Journal of the Standard & Poor’s calculated that the CRSP value Financial and Quantitative composite index, the Morgan weighted index is Analysis, no. 21, 293-305. Stanley Capital International’s mean-variance efficient. This paper applies Empirical index (EAFE) and the Depending on the prior the Bayes methods for portfolio International Finance probability lies between 1% and selection. Corporation’s composite index 27%. • M.POJARLIEVAND W. for emerging markets • L.PASTOR(2000). Portfolio POLASEK(2000). Bayesian (EMERGE). The result show Selection and Asset Pricing Portfolio Analysis. Technical that ’failure to account for Models. Journal of Finance, vol. Report, University of Basel, estimation risk results in 55, 179-223. (www.unibas.ch/iso). substantially higher volatility’. This paper analyses the home The paper describes univariate • R.S.TSAY(2000). Extreme bias in connection with value ARCH and multivariate value analysis of financial data, and size effects for the NYSE VAR-GARCH ’in mean’ Technical Report, Univ. of stock index from January 1970 processes to estimate the returns Chicago. to December 1972. The Bayesian of a portfolio. The posterior This paper considers the approach assigns a prior for the distribution of the weights of Generalized Extreme Value hypothesis that the US market is the mean-variance portfolio is distribution and the globally efficient. For different derived for a continental model Generalized Pareto distribution

18 ISBA Bulletin, September 2000 BIBLIOGRAPHY

(GDD) and investigates the 461-490. neither the FF/DM rate nor the occurrence times and excesses By employing the IL/DM rate exhibits over high threshold values in Metropolis-within-Gibbs nonlinearity any more. financial time series. The Gibbs methodology with data In the following we list sampler is proposed to estimate augmentation, this paper references to few more articles the excesses which are assumed develops a Bayesian approach of interest. to be GPD distributed. Model to estimating exchange rate • J.PHILIPPE (1991). Bayesian checking is done by Q-Q plots. target zone models and rational and CAPM estimators of the Applied to the S&P 500 Index expectations models in general. means: Implications for from 1962 to 1997 the author It also introduces a portfolio selection. Journal of finds volatility clustering for simultaneous-equation target Banking and Finance 15, 717-727. certain years and increased zone model that incorporates • S.KANDEL,R.MCCULLOCH, volatility for daily returns in stochastic realignment risk. AND R.F. STAMBAUGH (1995). October, November and Under the system of equations Bayesian Inference and December. Also the US interest framework, both the magnitude Portfolio Efficiency. Review of rate is found to have a profound and the likelihood of an Financial Studies, 8, 1-53. impact on the stock market. adjustment in the central parity • J.GEWEKE, AND G.ZHOU, as well as the correlated error • W. POLASEKAND L. (1996). Measuring the Pricing structure of the system are REN(2000). Volatility analysis Error of the Arbitrage Pricing examined. The probabilistic during the Asia crisis: A Theory. Review of Financial structure introduced is flexible multivariate GARCH-M model Studies, 9, 557-587. for stock returns in the US, enough to generate realistic • K.LI (1999). Testing Germany and Japan. To appear relationships among exchange Symmetry and Proportionality in Applied stochastic models for rate, macro fundamentals and in PPP: A Panel Data business and industry (ASMBI). central parity realignment. The Approach. Journal of Business The paper examines the daily simultaneous-equation target and Economic Statistics, 17, stock returns in a 3-dimensional zone model is compared with 409-418. country model for effects of the four alternative target zone Asia crisis in 1997. By models. Using FF/DM and • L.PASTORAND R. F. calculating the marginal IL/DM exchange rate data, the STAMBAUGH (1999). Costs of likelihoods in a MCMC run, a model comparison results are Equity Capital and Model Bayes test finds that October 24, overwhelmingly in favor of the Mispricing. Journal of Finance, 1997 is the most likely day target zone model with constant 54, 67-121. where a break in the dynamic realignment risk. The predictive • R. F. STAMBAUGH (1999). structure of the performance of various target Predictive Regressions. Journal VAR-GARCH-in-mean model zone models is mixed. In of Financial Economics, 54, could have happened. It is general, the target zone models 375-421. shown that the break has are not able to outperform the • L.PASTOR, AND R. F. changed the dynamic random walk model of STAMBAUGH (2000). interaction and transmission exchange rate in terms of first Comparing asset pricing pattern of the multivariate moment prediction, which is in models: An investment volatility model. agreement with the general perspective. To appear in •LI, K. (1999). Exchange Rate findings in the literature. It is Journal of Finance. Target Zone Models: A concluded that once allowing Thanks to Wolfgang Polasek for Bayesian Evaluation. Journal of for stochastic realignment risk his help with part of the Applied Econometrics, 14, in the target zone models, references.

19 ISBA Bulletin, September 2000 STUDENT’S CORNER

NEW example, they may have a fixed questions planned ahead of CONTRIBUTIONS slot for seminars on a particular time, and spread them out day of the week, and so they throughout the day (although by Maria De Iorio may only want to interview one some questions will be more [email protected] candidate per week. appropriate for particular A typical interview has two people, such as a department We present an experience main components: meeting with head, or someone in a particular on job-searching and the faculty individually, and the field). A good way to keep a another Ph.D dissertation. talk. First let me discuss the conversation going with Herbie Lee meetings. While not physically someone is to talk about their Visiting Assistant Professor, strenuous, meeting with people research. If you have done your ISDS, Duke University, NC, for an entire day is rather homework, you will have U.S.A. mentally and emotionally looked at the faculty web pages, Ph.D at Carnegie Mellon strenuous, so do not be or glanced at some articles by University 1998 surprised if you are exhausted several of the faculty, and you [email protected] at the end of the day. It seems can ask them to tell you more Thoughts on the Job Market like common sense, but a good about a particular part of their night’s sleep is very helpful. research. Sometimes this is not I would like to expand on The individual meetings are a always possible (I had one several aspects of Jaeyong Lee’s way for both you and the “surprise” interview at a school excellent advice in the June 2000 department to gauge how well not too far away, where the best Bulletin. Like him, I also you would interact socially and date to schedule the interview focused on the academic academically if you were to be turned out to be in a day and a research job market, although hired. You want to make sure half, since I could drive there in many of my comments are that you come across as friendly two hours, so I didn’t really applicable to all types of job and intelligent, but not arrogant have much time to prepare for searches. Here I will focus or boastful. Do your best to this interview), and it is usually primarily on my experiences work your achievements into possible to get someone to talk with interviews. conversation in a graceful way, about their research without The most important thing to or as extended responses to sounding too ignorant (for remember about searching for a questions. As Jaeyong Lee example, you can ask about job is that it takes a lot of time. pointed out, common questions some of their outside In the fall semester, you need to include those about your collaborations, or try to pick up apply for jobs. In the spring research and your teaching. You on a topic that comes up in an semester, assuming all goes may also be asked about your earlier part of the conversation). well, you will have interviews. philosophy (why are you In most cases, your talk will be Pretty much all of the time Bayesian?), your areas of at the end of the day, but spent on interviews (including interest in other fields for future sometimes the talk will be the traveling and possible extra collaboration, and any unusual earlier, in which case they may Saturdays) is time that you items on your CV. Of course, ask you about details of your don’t have to work on your you could be asked about talk when they meet with you. thesis, so plan ahead! anything, and you will just have The talk is an important part of In terms of planning ahead, try to think on your feet. Be the interview. Make sure you to keep your late January, prepared to be asked the same have practiced your talk a lot. February, and early March question by many different Keep in mind that the talk schedules as open as possible, to people, and patiently give them should be an advertisement for give you maximum flexibility in each a full answer. Also be your thesis (or recent work), and scheduling interviews. prepared for them to ask you if that proofs should normally be Departments will have many you have any questions. You left out (if your advertisement constraints of their own. For should come with several goes well, they will want to read

20 ISBA Bulletin, September 2000 STUDENT’S CORNER your thesis later, and can get the I was using was plugged into. efficient procedures for use in proofs then). A good level is to After your talk, or at the end of generalized basis function aim your talk to be mostly the day, some subset of the modelling which include understandable by an advanced faculty will normally take you wavelets, regression splines and graduate student. The most to dinner at a nice restaurant. artificial neural networks. important thing is that the Practice your table manners, if A distinctive feature in all of our faculty in your audience necessary! You may also have to methods is that we treat the understand your talk. If you try practice your conversational dimension of the model as to be too impressive by covering skills, discussing things other unknown a priori. This induces complex details, you may lose than statistics. However, I a model averaging approach to your audience, and they won’t found that often the faculty prediction and we show that the be impressed at all. Make sure would spend much of the time Bayesian models automatically you sound enthusiastic about talking to each other, which adapt their complexity to fit the your work. You may be made the dinner much easier, problem at hand. We make nervous, or your personality since I wasn’t the focus and extensive use of Markov chain may not be emotive, but you didn’t have to continually think Monte Carlo simulation to need to sound interested in of intelligent things to say. approximate the non-standard what you are talking about (but Finally, the interview gives you distributions arising from this don’t overdo it, of course). a chance to get the general approach. We demonstrate how Practice the timing of your talk, flavor of a department. While “perfect simulation” using so that it is not too long or too you are visiting, you should coupled Markov chains from short. Most job talks are think about whether you would the past can be used to draw scheduled for one hour, fit in if you were hired. Do independent and identically although you should confirm people tend to work distributed samples from the this as it does sometimes vary. individually or collaborate? posterior model space of In this case, you want to aim for What is the dynamic with the orthogonal basis function about 55 minutes, leaving some graduate students? How happy models such as wavelets, time for questions. When in would you be coming to work Fourier bases and doubt, a little shorter is usually here every day? And, of course, Demmler-Reinsch splines. better than longer. Have an idea this is your chance to check out We then present two new of what can be cut near the end the city or town in which you nonlinear methods that exploit in case you run short on time. might be living for many years the Bayesian model averaging The talk dynamic may differ as to come. Best of luck on your paradigm. First, we introduce a some departments save job search! multivariate polynomial spline questions until the end, and that provide a Bayesian version of local polynomial modelling. some may ask constantly Christopher C. Holmes throughout the talk (I had not Second, we consider a Bayesian [email protected] known about this ahead of time, partition model that decomposes Bayesian Methods for Nonlinear and at one talk, I had so many the covariate space into a Classification and Regression random number of disjoint questions that I was only about Advisors: half way through at the Dr. David G.T. Denison regions within which the data is 55-minute mark). Try not to get and Dr. Bani K. Mallick modelled as exchangeable from flustered when things go wrong, some simple distribution. because sometimes it will just We introduce novel Bayesian Examples are used throughout happen – during one of my procedures for the nonlinear to illustrate the methods. talks, someone in the audience classification and regression of Particular attention is paid to decided the coffee maker was univariate and multivariate non-Gaussian data, including too noisy and so turned off the response data. We present two Poisson, binary and polychotomous power strip, the same power new Bayesian methods and regression, in univariate and strip that the overhead projector develop computationally multivariate settings.

21 ISBA Bulletin, September 2000 NEWS FROM THE WORLD

NEWSFROMTHE ✽ ISBA Regional Meeting at Computation and Probabilistic WORLD Laguna Beach. April 5-8, 2001, Graphical Models”. Submit Laguna Beach, California. your papers by December 8, by Antonio Pievatolo A preliminary announcement 2000. (isas2001.tripod.com/symp). [email protected] was published in the previous ✽ Second Workshop on ISBA Bulletin. Further details ✽ denotes an ISBA activity Bayesian Inference in can be found at www.socsci. Stochastic Processes. May 31- ➤ Events uci.edu/bayesian. About half June 2, 2001, Varenna, Italy. of the programmed eight Deadline for contributed MSRI Workshop on Nonlinear plenary sessions will focus on papers: December, 15th, 2000. Estimation and Classification. Bayesian applications in the www.iami.mi.cnr.it/ March 19-29, 2001, Berkeley, CA. behavioural and social sciences conferences/varenna.html (Partially edited from the and the remaining half on AMSDA 2001. June 12-15, 2001, workshop announcement). Bayesian methodology. The Compi`egne,France. Researchers in many disciplines organizers welcome suggestions The 10th International face the formidable task of for plenary session speakers: Symposium on Applied analyzing massive amounts of please submit your papers by Stochastic models and Data high-dimensional and December 31, 2000. Analysis will focus on new highly-structured data. As a Third Amsterdam Conference trends in theory, applications result, fundamental statistical on Multilevel Analysis. April and software. Particular interest research is being undertaken in 9-10, 2001, Amsterdam. will be given to interesting a variety of different fields. This is a preliminary applications in engineering, Driven by the complexity of announcement. Multilevel productions and services these new problems, highly analysis is also known as (maintenance, reliability, adaptive, non-linear procedures multilevel modelling, planning and control, quality, are now essential components hierarchical data analysis, and finance, insurance, management of modern “data analysis”, a random coefficient modelling. and administration, inventory term that we liberally interpret The conference will be about and logistics, marketing, to include speech and pattern statistical theory and multilevel environment, human resources). recognition, classification, data software, methodology, and Papers deadline: January 12, compression and signal innovative applications. 2001. (www.hds.utc.fr/asmda2001). processing. The development of Multilevel analysis is applied in new, flexible methods combines disciplines such as education ISIPTA ’01. June 29-26, 2001, advances from many sources, research, epidemiology, Cornell University, Ithaca, NY. including approximation theory, geography and sociology. The steering committee of numerical analysis, machine Submit your abstract (ASCII ISIPTA has decided to create a learning, signal processing and files) until January 15, 2001, by biennial series of symposia on statistics. The workshop intends email to multi.level@ppsw. imprecise probabilities and their to bring together eminent rug.nl (organizers: Jop Hook applications; ISIPTA ’01 is the experts from these fields and and Tom Snijders). Further second of these. For an also to introduce the research information will be diffused introduction to imprecise topics to graduate students by through the discussion list probabilities see the web site providing travel support and by “multilevel” at Mailbase ippserv.rug.ac.be. requiring the last speaker of (www.mailbase.ac.uk). Contribute a session to the each session to give an ISAS 2001. March 19-23, 2001, Joint Statistical Meetings. overview of the field. Abstracts La Habana, Cuba. August 5-9, 2001, Atlanta. are due by October 27, 2000. The theme of the International Read more on the SBSS site: Web page: cm.bell-labs. Symposium on Adaptive www.stat.ucla.edu/~jsanchez/ com/who/cocteau/nec/. Systems is “Evolutionary sbssnews/sbssnews.html

22 ISBA Bulletin, September 2000 NEWS FROM THE WORLD

Euroworkshop on statistical * John Liechty, Cambridge this problem, precise modelling. University, “MCMC Methods definitions, and extends the The EU will finance a series of for Switching Diffusion analysis to the question of three workshops on the Models”, under the supervision predictive inconsistency”. following topics in statistical of Gareth Roberts; Wallstrom received a $750 check modelling: mixed models, * Raquel Prado, Duke University, and a commemorative plaque. nonparametric models, and “Latent Structure in Non-stationary The winner of the Applied model diagnostics. Further Time Series”, under the Methodology Savage Award details at www.stat. supervision of Mike West. was Clare Marshal. She receives uni-muenchen.de/euroworkshop. Garrick is currently visiting a check for $750 and a commemorative plaque. No ➤ Carnegie Mellon, Clare is at Awards and Prizes Cambridge, Andrew is visiting discussion of her thesis was Ohio State, John is at Penn State presented at the JSM as she was ✽ The 1999 Savage Award. and Raquel at Simon Bolivar. unable to attend the meeting. The 1999 Savage Awards were The finalists summarized their The “honorable mention” award unveiled at the JSM in Indianapolis. dissertations at a special SBSS went to Andrew Mugglin. These awards are sponsored by session at the Indianapolis JSM, Andrew received a $100 check the Board of the Leonard J. organized and chaired by Ehsan and a commemorative plaque. Savage Memorial Trust Fund, Soofi, Chair of the Savage As summarized by Siddhartha the NBER-NSF Seminar on Award Evaluation Committee. Chib, “Mugglin’s thesis deals Bayesian Inference in Siddhartha Chib, a member of with an interesting and Econometric and Statistics, the evaluation committee, gave important problem in Spatial ISBA, and the ASA Section on a discussion of the presentations. Statistics - the analysis of Bayesian Statistical Science In his words, these were misaligned data with covariate (SBSS). They recognize “high-quality and information. The thesis outstanding theoretical and highly-impressive theses proposes several classes of applied contributions in covering a broad spectrum of hierarchical Bayes models with Bayesian Econometrics and topics... The theses demonstrate careful attention to diagnostics Statistics. There is also an the vitality of modern Bayesian and implementation”. honorable mention for an work”. Ehsan Soofi stepped down as outstanding dissertation in In addition to Ehsan Soofi (the chair of the Savage Award these areas. For the 1999 Chair) and Siddhartha Chib, Evaluation Committee, a awards, the finalists (from an other members of the position he has held since 1992. initial set of 13 contenders) were Evaluation Committee were It was during his tenure that the * Garrick Wallstrom, University Wesley Johnson, Mike Evans, Savage Award Session was of Minnesota, “Consistency and Tom Leonard and Nick Polson. launched. Soofi says that one of Strong Inconsistency of Formal Ehsan Soofi presented the the most rewarding aspects of Posteriors”, under the awards at a very well attended this very busy job is to see the supervision of Joe Eaton; SBSS business/social session joy of the finalists when they * Clare Marshall, Cambridge and mixer. The winner of the reach the Savage Award Section. University, “Bayesian Statistical Theory and Methods Savage Further details of the Savage Methods for Institutional Award was Garrick Wallstrom. Award can be found at Comparisons”, under the In his discussion, Chib www.stat.ucla.edu/~jsanchez/ supervision of David Spiegelhalter; synthesized this thesis as a sbssnews/awards/savage/ * Andrew Mugglin, University “theoretical contribution savage.html. Watch that site for of Minnesota, “Fully Model concerned with improper priors information about thesis Based Approaches for Spatially and the occurrence and submission and deadlines for Misaligned Data”, under the non-occurrence of strong the year 2000 competition, supervision of Brad Carlin; inconsistency. The thesis which will shortly be posted provides a solid treatment of there. (Thanks to Juana Sanchez).

23 ISBA Bulletin, September 2000 ISBA OFFICERS

Executive Committee Program Council Board Members

Deborah Ashby, Mark Berliner, Pet- President: Philip Dawid Chair: Edward George ros Dellaportas, Dani Gamerman, Past President: John Geweke Vice Chair: Anthony O’Hagan Alan Gelfand, Jayanta Ghosh, Jay President Elect: Alicia Carriquiry Past Chair: Robert Wolpert Kadane, Rob Kass, Luis Pericchi, Treasurer: Valen Johnson Sylvia Richardson, Dalene Stangl, Executive Secretary: Michael Evans Mark Steel § ¤ Web page: http://www.bayesian.org/ ¦ ¥

EDITORIAL BOARD

Editor

Fabrizio Ruggeri

Associate Editors Corresponding Editors

Bayesian Teaching Carmen Armero Jim Albert Marilena Barbieri Students’ Corner Christopher Carter Maria De Iorio Roger M. Cooke Petros Dellaportas Applications Eduardo Gutierrez Pena˜ Sujit Ghosh Robert Kohn Jack C. Lee Software Review Leo Knorr-Held Gabriel Huerta Udi Makov Marek Me¸czarski News from the World Renate Meyer Antonio Pievatolo Suleyman Ozekici Wolfgang Polasek Bayesian History Jose´ Miguel Perez Raquel Prado Josemar Rodrigues Interviews Alfredo Russo David Rios Insua Antonia Amaral Turkman Michael Wiper Brani Vidakovic Mattias Villani Annotated Bibliography Hajime Wago Siva Sivaganesan Simon Wilson Lara Wolfson Karen Young

 Mailing address: ISBA Bulletin - CNR IAMI - Via Amp`ere 56 - 20131 Milano (Italy) E-mail: [email protected] Phone: +39 0270643206 Fax: +39 0270643212 Web page: http://www.iami.mi.cnr.it/isba 

24