Forecasting US bond default ratings allowing for previous and initial state dependence in an ordered probit model

In this paper we investigate the ability of a number of different ordered probit models to predict ratings based on firm-specific data on business and financial risks. We investigate models based on momentum, drift and ageing and compare them against alternatives that take into account the initial rating of the firm and its previous actual rating. Using data on US bond issuing firms rated by Fitch over the years 2000 to 2007 we compare the performance of these models in predicting the rating in-sample and out-of-sample using root mean squared errors, Diebold-Mariano tests of forecast performance and contingency tables. We conclude that initial and previous states have a substantial influence on rating prediction.

Lock-in, path dependence, and the Internationalization of QWERTY

This paper looks at the emergence of what is described here as the QWERTY family of standards (QWERTY and its international adaptations QZERTY, AZERTY, and QWERTZ). QWERTY has been described as an inferior solution and an accident of history. However, the analysis here finds that each member of the family represented highly efficient adaptations to specific user needs and technical challenges encountered in their own environments. These findings may be seen to have wider implications given QWERTY’s role as paradigm case in the literature on increasing returns and path dependence, and these are pursued in the paper