MILTON FRIEDMAN AND ANNA SCHWARTZ Monetary Trends reports a great many findings-53 are enumerated in the introduction-but paramount is the stability of the demand for money in the US and Britain over the past century. The money stock controls money income. This proposition more than anything else is the point of their painstaking investigation. Friedman and Schwartz argue against what might neutrally be called the early post-war view of the macroeconomic role of money: Velocity will move easily to reconcile any level of nominal income to any money stock. The demand for money in this view is a will-o'the-wisp, as the authors put it. Monetary policy has little influence over real activity; stabilization policy necessarily relies on fiscal instruments. The volume is completely convincing in disposing of this idea; today's reader is likely to be puzzled why so much space is devoted to a view that has no serious adherents among professional economists. Friedman and Schwartz are generals fighting an earlier war, a situation accentuated by the long lags in putting this volume into print. Though the opposing armies fighting for the early postwar view have withdrawn in total rout, a new front has opened up, and the quantity theory is fighting for its life once again. Worse yet, the new armies are fighting under the banner of free-market economics and are led by former colleagues and students of Milton Friedman. The midwest, once the stronghold of the quantity theory, is now largely occupied by the enemy. The new monetary economics views the quantity theory as nothing more than an artifact of government regulation. An economy organized along free-market principles could function without money at all (Fischer Black, 1970). It is true that the kinds of monetary regulations imposed by the American and British governments of the past century create a more-or-less stable relation between a certain class of assets called money and nominal spending (Eugene Fama, 1980), but different regulations would alter that relation. Even the real bills doctrine, anathema to quantity theorists because it invites unlimited expansion of the money supply, has advocates in the new school (Thomas Sargent and Neil Wallace, 1981). monetary system where the government is unconcerned about the money stock has been advocated by a University of Chicago economist while visiting the Hoover Institution (John Bilson, 1981). Restoring the intrinsic value of money, not limiting its quantity, has been found to be the key to successful disinflation by one member of this group (Sargent, 1982). critical summary, titled A Laissez Faire Approach to Monetary Stability, written * See p. 1528, above, for publication information.

AN EARLIER VERSION of this book was ready in second draft as long ago as 1966, as the authors Milton Friedman and Anna Schwartz, henceforth F-S, tell us in their Preface. But that version was restricted entirely to the United States. A National Bureau reading committee suggested that its scope be enlarged to cover the United Kingdom. Extending the coverage of the study to encompass the UK proved much more time consuming than had been expected. F-S now question whether the inclusion of the UK, the new material and the lengthened data period, were adequate recompense for the extra effort and long delay. They may be correct in this doubt, even though the inclusion of the UK is especially interesting for British readers. Since F-S began work on this book, much that was challenging and original in their approach, for example the relationship between monetary growth and interest rates, has been absorbed into the mainstream of economic thought. That is, of course, no criticism of the analysis, but it does mean that the book does not have quite the same punch and excitement that its publication, say, in 1966 would have engendered. Moreover, knowing that F-S were working on UK monetary data, I had been hoping for a repetition of that magical combination of historical and institutional understanding, statistical thoroughness and overall analytical brilliance that enabled F-S to illuminate the episodes of A Monetary History of the United States, but this time for the United Kingdom also. However, this was never intended to be that kind of book. It is not historical and episodic at all, strictly statistical. There is virtually no comment on the actual flesh and blood developments of British (or American) monetary history. Instead F-S have gathered together a small number of key economic series, on incomes, prices, money stock (M2 definition), interest rates, and put these series through a statistical/econometric mangle. As Thomas Mayer has indicated, this uncompromising devotion to statistical duty, unleavened by episodic and historical commentary, makes heavy reading. Nevertheless, besides compelling respect for the scholarship and thoroughness of the research, the book contains many new, important and provoking findings and analytical judgments, several of * See p. 1528, above, for publication information

The author reviews and evaluates Beckers A Treatise on the Family which concerns (a) the allocation of roles and resources and distribution of income within families; (b) the formation dissolution growth and structure of families and (c) the implications of these analyses for inequality and social mobility. In the present paper Beckers approach and substantive conclusions regarding the role of theory and empirical evidence in the study of economics and the family are critically examined. It is suggested that while Beckers discussion is a source of many useful insights the theory does not attempt a systematic treatment of the transition from traditional to modern types of family. (EXCERPT

Abnormal returns (market model prediction errors) are the subject of many event studies in accounting and finance literature. Conditional on the event of interest, researchers have recently used cross-sectional regressions to examine relations between abnormal returns and firm specific variables. This paper demostrates that non-constant variences and covariances in market model residuals across firms introduced bias in the estimated slope coefficients of the independent variables, i.e., the expected signs of the estimated slope coefficients can be predicted a priori. A method is develope to removed the bias in the estimated slope coefficiets and is found to be effective. This method explicitly takes the dependence among abnormal returns across firms into account. Methods that assume abnormal returns across firms to be independent do not control for such bias

This study tests Chicago Board Options Exchange efficiency by examining option price behavior in the weeks surrounding a firm's quarterly earnings announcement. The evidence presented here suggests that a first-order autoregressive seasonal process describes quarterly earnings behavior and demonstrates that the information content of an earnings announcement is fully incorporated in option prices by the end of the announcement week.

The specification of the market expectation of accounting numbers is a common feature of many empirical studies in accounting and finance. Givoly and Lakonishok (1979) found that financial analysts' forecasts have information content. This study evaluates the quality of analysts' forecasts as surrogates for the market expectation of earnings and compares it with that of prediction models commonly used in research. Results indicate that prediction errors of analysts are more closely associated with security price movements, suggesting that analysts' forecasts provide a better surrogate for market expectations than forecasts generated by time-series models. The study also identifies factors that might contribute to the performance of the financial analysts'forecasts. The broadness of the information set employed by analysts and, to a lesser extent, their reliance on information released after the end of the fiscal year appear to be important contributors to their performance.

This paper presents evidence that petroleum firms whose financial statements were adversely affected by Statement of Accounting Standards No. 19 (SFAS-19) increased the rate at which they changed auditors during the full cost/successful efforts controversy. Firms relatively unaffected by SFAS-19 experienced no such increase in auditor change rates. While some important theoretical and empirical limitationns are encountered, the evidence is generally inconsistent with the accounting irrelevancy view that SFAS-19 had no economic consequences for petroleum firms. Auditor-client disagreement on this accounting standard appears to be an important determinant of the decision to change auditors. However, there is no observed tendency for firms to switch to auditors with whom they agree on petroleum accounting

The SEC currently requires that firms disclose recent disagreements with their auditors over accounting or auditing matters when a change in auditor is reported. The effectiveness and usefulness of requirements to disclose disagreements have been questioned, and previous empirical research on the issue has been inconclusive. This study investigates the information content of disclosure of the auditor-firm disagreements. The analysis indicates a significant negative market reaction in the week that the Form 8-K is filed with the SEC. This finding is consistent with the position that the disclosure provides information useful to investors.