A Variance Bounds Test of the Linear Quardractic Inventory Model
AbstractThis paper develops and applies a novel test of the Holt, et al.(1961) linear quadratic inventory model. It is shown that a central property of the model is that a certain weighted sum of variances and covariances of production, sales and inventories must be nonnegative. The weights are the basic structural parameters of the model. The model may be tested by seeing whether this sum in fact is nonnegative. When the test is applied to some non-durables data aggregated to the two-digit SIC code level, it almost always rejects the model, even though the model does well by traditional criteria.
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Bibliographic InfoPaper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 1581.
Date of creation: Mar 1985
Date of revision:
Publication status: published as West, Kenneth D. "A Variance Bounds Test of the Linear Quadratic Inventory Model," Journal of Political Economy, Vol. 94, No. 2, pp. 374-401, April 1986.
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Postal: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.
Web page: http://www.nber.org
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Other versions of this item:
- West, Kenneth D, 1986. "A Variance Bounds Test of the Linear Quadratic Inventory Model," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 94(2), pages 374-401, April.
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