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their respective price coefficients from period to period with 95
percent confidence in the limiting interval. These stochastic speci-
fications are exhibited in the a2 column of Table 1. Additionally,
due to uncertainty on both the sign and the magnitude of the time
coefficient in the Choice steer price equation it was specified to
change by as much as plus or minus .2 with 95 percent confidence.
Interestingly, the structural results in Table 1 show little
discrepancy between the constant parameter and varying parameter
schemes. This may indicate that the variances attached to the varying
parameters may be too small to effectively change the constant parameter
values by very much. The restricted reduced forms for both models also
reflect this similarity in coefficient magnitudes.
The contribution of the varying parameter specification adopted
can be evaluated by the predictive performance of this method versus
the constant parameter model. The predictive interval tests are pre-
sented in Table 3. It should be noted that the estimation of each
model was based on data which occurred before the sharp run-up in
Choice steer prices. Through the 1977-IV estimation period the
highest price observed for was the $48.64 during 1975-111. Table 3
separates the forecasts into two categories -- the one period ahead
forecast based on parameter estimates made through the previous quarter,
and the two period ahead forecast defined similarly. The "Naive" column
corresponds to the structural model which is naively updated by adding
additional unweighted observations successively. The "VARY-S" and
"VARY-RF" columns correspond to using the updating recursions for the
structural model and the reduced form model, respectively. Of course,