Earnings smoothing, Changes in accounting methods, Earnings management

In a recent article, F. K. Wright proposes a linear programming approach to the measurement of asset services.' He bases his work on the theories and shadow-pricing developed within linear programming. Similar uses of shadow prices are to be found in other papers on accounting research. Usually, in a linear programming context, one need not distinguish between the gain in having one more unit of a resource, as opposed to the loss in having one less unit. The purpose of this note is to show, by means of an example, the need for making such distinctions. I give a simple illustration and then discuss its relation to general linear programming theory and its implications for accounting research.

Linear Programming, Asset services

Journal Article Monetary and Fiscal Policy in a World of Capital Mobility Get access John E. Floyd John E. Floyd University of Washington Search for other works by this author on: Oxford Academic Google Scholar The Review of Economic Studies, Volume 36, Issue 4, October 1969, Pages 503–517, https://doi.org/10.2307/2296473 Published: 01 October 1969 Article history Received: 15 May 1968 Revision received: 10 February 1969 Published: 01 October 1969

J. M. Keynes' theory of portfolio management (modified and refined by Tobin)occupied an important role in his analysis of the demand for money. According to this theory, financial investors were thought to vary the composition of their portfolios between money and securities on the basis of expected yields on securities. When yields were expected to rise, investors would shift out of securities and into money. Conversely, when yields were expected to fall, investors would shift out of money and into securities. Hence, the asset, or portfolio, demand for money was argued to be negatively related to the expected yields on securities.

D. Levhari, E. Sheshinski; The Relation between the Rate of Return and the Rate of Technical Progress1, The Review of Economic Studies, Volume 36, Issue 3, 1 Ju

Given any problem of decision under risk to which the expected utility hypothesis applies, one may associate to it first a riskless problem in which random disturbances are replaced by their expected values, and second a class of intermediate risky problems with decreasing degrees of uncertainty. In this class the optimal decision depends in principle on the degree of uncertainty but turns out to be independent of it, to the first order of approximation, in the neighborhood of the riskless problem. The first-order certainty equivalence explains why it is so difficult to characterize the situations in which an increase in the degree of uncertainty requires a decrease in the allocation of resources to the risky projects. (Author)

I. Introduction, 415. — II. An analytical interpretation of negative value added, 425. — III. Negative value added and nonzero elasticity of substitution, 427. — IV. The measurement of effective protection when value added is negative, 430. — V. Conclusion, 432.

In this article, we shall discuss several of the alternative definitions of risk that have been proposed from time to time. We shall show that one definition — risk is the probability of loss — leads to a formulation of the investment decision problem as a chance constrained problem. Three different strategies are then proposed by which an investor can reduce risk. It is our belief that professional investors utilize all three strategies and that risk, in many such cases, is not a substantial constraint on investor behavior.