Auditing, Auditor opinion, Informativeness, Negative confirmation

Estimation Problem, Capital allocation, Verifiability, Decomposition Model

Peter S. Chung, An Investigation of the Firm Effects Influence in the Analysis of Earnings to Price Ratios of Industrial Common Stocks, The Journal of Financial and Quantitative Analysis, Vol. 9, No. 6 (Dec., 1974), pp. 1009-1029

This paper is addressed to the selection of an optimal mix of electricity generating plants. The focus is on the problem of uncertainty with respect to the date of availability of breeder nuclear reactors. Sequential probabilistic linear programming is employed. This makes it possible to optimize the mix of fossil, nuclear, and peaking plants to be installed during the 1980's -- assuming that breeder technology will become available at some randomly determined later date. The model allows for the effects of exhausting our reserves of uranium ore. The exhaustion of these resources does not lead to disaster in the 21st century for an economy or a world with a backstop technology such as coal-fired electricity plants. There seems to be a low value of information on the breeder availability date, for the initial policy is rather insensitive to this date. This conclusion holds not only when future demands are taken as fixed parameters, but also when they are dependent upon the price of electricity. On environmental grounds (climate changes radioactivity hazards, air and water pollution), there may be good reasons to slow the rate of growth of electricity demand. These are quite different issues than exhausting the resources of low-cost uranium ore. If our numerical assumptions are correct, it is not optimal to slow down the electricity growth rate up to 1990 just because of possible delays in the arrival of the breeder and hence a rapid rise in the price of uranium. For the year 2000, the decision on demands can be deferred until the time arrives to make capital investment decisions for the decade following 1990. By that point, some of the breeder's uncertainties will have been resolved.

This paper examines stock market efficiency with respect to money supply data by testing (1) regression models of stock returns on monetary variables and (2) trading rules based on money supply data. The evidence indicates no meaningful lag in the effect of monetary policy on the stock market and that no profitable security trading rules using past values of the money supply exist. Therefore this evidence is consistent with the efficient market model. Current security returns incorporate all information contained in past money supply data and, in addition, appear to anticipate future changes in the money supply. A number of previous studies have concluded that lags exist and can be used in profitable trading rules. Analysis of these studies demonstrates that for a variety of reasons the evidence in these past studies does not sustain such conclusions.

George H. Sorter, Martin S. Gans, Opportunities and Implications of the Report on Objectives of Financial Statements, Journal of Accounting Research, Vol. 12, Studies on Financial Accounting Objectives: 1974 (1974), pp. 1-12

C-V-P Analysis, Cost-Value-Profit analysis, Upper boundaries

I. A one-sector general equilibrium analysis, 553. — II. A numerical example, 560. — III. Long-run incidence in a growing economy, 563. — IV. The path of adjustment, 570. — V. Conclusion, 572.

In a recent article in this Journal, John H. Makin 1 observed a positive relationship between the dollar forward premium on gold and the ratio of gold to dollar assets in international reserve portfolios. This, he concludes, shows that gold is not a sterile asset; it has an expected rate of return that acts as a yield variable in the calculus of central banks making portfolio choices between gold and dollar assets. expected rate of return on gold is represented by the size of the forward premium on gold, which mirrors expectations of capital gains to be realized in the event of appreciation (or revaluation) of gold with respect to the dollar. analysis, as Makin recognizes, depends crucially on the assumption that an observed forward premium on gold reflects expectations of an increase in the dollar price of gold. behavior of the forward gold premium, however, should reflect, in addition to expectations about the future price of gold, movements in the rate of return on dollar securities. Covered interest arbitrage between the dollar and gold should establish a positive relationship between the rate of interest on dollar securities and the forward gold premium, just as it creates a link between interest differentials and forward premiums in currency markets. If the three months' rate of return on dollar-denominated securities rises above the three months' (percentage) forward premium on gold by an amount greater than the costs of moving into and holding dollar securities, arbitragers can profit by replacing gold with dollar securities in their portfolios and simultaneously buying an equivalent amount of gold forward. On the other hand, if the rate of return on dollar securities falls below the (percentage) forward premium on gold by an amount greater than the costs of moving into and holding gold, arbitragers can profit by replacing dollar-security holdings with gold and selling an equivalent amount of gold forward.2 This demand and supply of forward gold by * I am indebted to Thomas D. Willett and Terry Rush for helpful comments, and to John H. Makin for making available his series on forward gold premiums. Suggestions by referees were also highly useful. 1. John H. Makin, Swaps and Roosa Bonds as an Index of the Cost of Cooperation in the 'Crisis Zone', this Journal, LXXXV (May 1971), 34956. Also see John H. Makin, The Composition of International Reserve Holdings: A Problem of Choice Involving Risk, American Economic Review, LXI (Dec. 1971), 818-32. 2. Arbitragers will be willing to extend their positions until the cost of moving into and holding the asset acquired rise so as to become equal to the