The purpose of this study is to develop and estimate sectoral demand for money functions and an aggregate supply function for money within the framework of a simultaneous-equations model of major United States financial markets. The study is exploratory in nature in several respects. The final form of the behavioral equations is, of course, open to question. Also, the data used in the estimation of the behavioral equations have recently been revised by the Flow of Funds Section of the Federal Reserve Board.

The use of the expected utility hypothesis and the “portfolio approach” has recently become quite popular by both writers in monetary theory and in financial management. Most discussions are given within what might be called the Tobin-Markowitz framework. One very important result recently discussed at some length is the Tobin “separation theorem.” This theorem essentially says that a quadratic preference function, or a normal distribution of returns on risky assets is a sufficient condition for the proportions of the various risky assets in a portfolio to be independent of the proportion of the portfolio held in a safe asset. The proofs of this theorem are given within a framework of the decision maker who minimizes portfolio variance for a given portfolio return, using variance as a measure of risk of the portfolio.

Reviews the book "Quantitative Analysis of Financial Decisions," by James C.T. Mao.

William Breen, John Boyd, Classroom Simulation as a Pedagogical Device in Teaching Money and Banking, The Journal of Financial and Quantitative Analysis, Vol. 11, No. 4, 1976 Proceedings (Nov., 1976), pp. 595-606

The Sharpe or diagonal portfolio model has been accepted by a large segment of both academic and practical researchers in portfolio theory. The model is tractable, requires a relatively small set of inputs, and is viewed by many to present “reasonable” assumptions regarding the workings of the security market.

ABSTRACT Studies relating accounting and price data often use the COMPUSTAT or related PDE data base as the source for the accounting data. This practice may introduce a look‐ahead bias and an ex‐post‐selection bias into the study. We examine this problem by comparing results from the standard COMPUSTAT data base with those from a data base which suffers from neither bias. We find that rates of return from portfolios chosen on the basis of accounting data from the two data bases differ significantly. Further, we find that these differences imply different conclusions when we test a specific hypothesis relating accounting and price data. Finally, we propose a number of remedies which may reduce the bias when the standard COMPUSTAT data base is used.

Studies relating accounting and price data often use the COMPUSTAT or related PDE data base as the source for the accounting data. This practice may introduce a look-ahead bias and an ex-post-selection bias into the study. We examine this problem by comparing results from the standard COMPUSTAT data base with those from a data base which suffers from neither bias. We find that rates of return from portfolios chosen on the basis of accounting data from the two data bases differ significantly. Further, we find that these differences imply different conclusions when we test a specific hypothesis relating accounting and price data. Finally, we propose a number of remedies which may reduce the bias when the standard COMPUSTAT data base is used.