Bankruptcy, Discriminant analysis, Financial ratios, Business failure

Neil B. Murphy, A Reestimation of the Benston-Bell-Murphy Cost Functions for a Larger Sample with Greater Size and Geographic Dispersion, The Journal of Financial and Quantitative Analysis, Vol. 7, No. 5 (Dec., 1972), pp. 2097-2105

This paper examines the random-walk hypothesis in the forward exchange market by applying spectral analysis to the three-month forward rates for dollars against sterling in the period 1961–1967.

Aggregation of monies must be determined in accord with the theory using the aggregate. This theory must specify aggregation (1) eligibility rules and (2) weights. Four current methods are evaluated on this basis: Fisher's aggregation bases eligibility on significant quantities Vi of monies Mi and attaches quantity weights Vi/Vn (Vn being numeraire). Pesek-Saving aggregation merely substitutes social marginal value weights Vipi/Vnpn. Friedman-Schwartz aggregation has eligibility depend on good subsequent statistical performance and uses weights given by private marginal values (gross of subsidies). Chetty's aggregation has all assets eligible and weighted by cross-elasticities of demand.

On the basic assumption that individual consumption of a good is a stochastic phenomenon, the first part of this article shows that under general conditions market quantity demanded is asymptotically (as n, the number of individuals in the market, increases) distributed as normal with and variance a function of own price given all other prices and individual incomes. Next, by the use of integral transforms, it is shown that the unknown market demand function can be approximated by a specific functional form. The estimation problems involved with such a model are discussed in the last part of the paper. Two BASIC, but fundamental, problems facing any econometrician attempting to estimate market demand curves are the choice of functional form and the justification of the normal form for the distribution of the disturbance terms. This paper goes some little way toward meeting both problems. The first step is to regard quantity demanded as a random variable. It is assumed that the axioms of choice of modern demand theory refer to the mean quantities demand curves one can derive the normal distribution as a limiting form for it is assumed that the consumer in determining his preferences determines the parameters of the distribution function of quantity demanded. Market stochastic demand curves are obtained from individual stochastic demand curves by taking the sum of the quantities demanded over all individuals in the market. It is shown that under certain weak assumptions about the characteristics of individual demand curves one can derive the normal distribution as a limiting form for stochastic market demand curves. The limits are taken as n, the number of individuals in the market, approaches infinity. It is shown that under the assumptions of the problem both the and variance of the market stochastic demand function are decreasing functions of own price. The second step in the argument is to obtain approximations for the functional relationships between the and own price and between the variance and own price for the market curve. This is achieved by stating those conditions under which upper and lower bound functions can be defined. The approximations to the actual, but unknown, functions are obtained by considering the convex combination of both bound functions. The last section of the paper discusses the problems involved in estimating the parameters of the limiting form of the market stochastic demand function.

[It is now popular to construct economic models in differential equation form. Perhaps the most serious econometric problem faced when dealing with a differential equation system is the practical difficulty of finding consistent estimates of the important structural parameters. In this paper a simple three-equation Phillips model is considered and consistent estimates of the structural parameters are provided by the minimum-distance procedure. The small-sample distributions of these estimates are investigated by the Monte Carlo method; and the results are then compared with those of the three-stage least-squares estimates found by making a discrete approximation to the system of differential equations.]

Journal Article Stabilization Policies in a Growing Economy: A Comment Get access John B. Taylor John B. Taylor Stanford University Search for other works by this author on: Oxford Academic Google Scholar The Review of Economic Studies, Volume 39, Issue 4, September 1972, Pages 515–519, https://doi.org/10.2307/2296522 Published: 01 September 1972