Abstract We propose to impose a weighted l1 and squared l2 norm penalty on the portfolio weights to improve out-of-sample (OOS) performances of portfolio optimization when the number of assets becomes large. We show that under certain conditions, the realized risk of the optimal minimum variance portfolio (MVP) obtained from the strategy can asymptotically be lower than those of benchmark portfolios with a high probability. Our theoretical results imply that penalty parameters for the weighted-norm penalty can be specified as a simple function of the number of assets and sample size. With the theoretical results, we also develop an automatic calibration procedure for choosing the penalty parameters. We demonstrate superior OOS performances of the weighted-norm MVP with two real data sets. Finally, we propose several alternative norm penalties and show that their OOS performances are comparable to the weighted-norm strategy.

How is it that environmental groups can have a strong impact on environmental policy but without much lobbying? This paper develops a model of "direct" (lobbying the government) and "indirect" (persuading the public) competition for political influence and finds that they are complementary. However, an increase in the effectiveness of public persuasion, or a rise of public environmental awareness, induces substitution between the two. The findings establish that the empirical phenomenon of lack of political contribution from environmental groups may not be related to financial constraints, but to their greater effectiveness in public persuasion and growing public environmental awareness. Copyright 2005, Wiley-Blackwell.

Abstract This paper examines how politically connected firms shape housing supply in U.S. cities. Using new data on campaign donations to U.S. mayors and a regression discontinuity design, I present three findings. First, developers connected to the mayor sell more new housing units. Second, more sales of new housing by connected developers coincide with higher local housing supply: cities where mayors received more developer donations issue nearly 70 percent more permits for new housing units. Third, differences in mayors’ pre-existing policy stances—rather than connections to developers—is a quantitatively larger determinant of local housing supply.

The primary purpose of incorporating a set of internal controls in the financial information system is to enhance the system's reliability-i.e., to maintain a high probability of preventing, detecting, and eliminating errors, irregularities, and fraud in the financial information system. The demonstrated reliability of the system provides evidence as to the quality of the output of the system. It is well accepted that the effectiveness of internal controls must be taken into account in determining the extent and nature of the audit procedures appropriate in a given examination.' The more reliable the system, the less extensive the tests the auditor need conduct. Recognizing this inverse relationship between effectiveness of internal control and audit scope, the American Institute of CPAs requires all auditors to initially evaluate the reliability of internal controls as a matter of audit standards.2 Recently, the Committee on Auditing Procedures of the AICPA released several statements on the subject of internal controls which re-emphasize the importance of the study of their reliability.3 But, despite this emphasis, the auditor currently does not possess a means to objectively evaluate the reliability of the internal control system. Conventionally, the auditor uses questionnaires, flow charts, and tests of transactions for evaluation pur-

Reviews the book "Information for Decision Making," edited by Alfred Rappaport.

Abstract Recently, professors Karl Kafer and V. K. Zimmerman presented an excellently documented paper on the evolution of the funds statement in the U.S. and in Europe. Following extensive exploration, they pointed out some significant deficiencies of the funds statement. The main purpose of this article, however, is to present a different format for the construction of this flow statement. It is hoped that a structural change in this flow statement will throw some additional light on the study of flows of economic resources at the business-enterprise level. In addition to recognizing the distinction between financial and nonfinancial flows of business operations, it is important to analyze their interplay. Productive activities may be financed internally, externally, or both. A detailed presentation of the financial activities of an enterprise will show not only how additional productive resources are acquired, but will also provide a basis, in part at least, for analyzing expansion and future income flow. The conventional balance sheet and income statement are deficient in depicting financial activities of a firm and in relating theft relationship to the firm's productive activities. It must be remembered that net income is "attributable to the whole process of business activity" and that the operations involves continuous movement of productive and financial resources. The resources-flow statement should not be treated as a supplementary device. It is a basic statement in its own right. With two basic types of flows, the need for at least two flow statements is quite dear. In addition, the resources-flow statement is much more than a statement of financial flows.

Abstract The two levels of accounting, microaccounting on one hand and macroaccounting on the other, indicate not only that accounting is a rapidly expanding field but also that accounting plays an important role in today's complex economy. The purpose of this article is to explore the interrelationship between microaccounting and macroaccounting. More specifically, it attempts, firstly, to identify macroaccounting as a branch of accounting; secondly, to examine briefly the interrelationships among the four sub-areas of accounting and economics, i.e., microaccounting, macroaccounting, microeconomics, and macroeconomics; thirdly, to compare some of the basic similarities and dissimilarities between microaccounting and macroaccounting; and finally to explore potential influences of macroaccounting on microaccounting. The article concludes that the demand for additional information from accounting for managerial, investment, and analytical purposes points to the need for more constructive and creative thinking in accounting.

Abstract The indispensableness of a national position statement in addition to the national income accounting system for macroeconomic analysis can scarcely be overemphasized. But this hardly seems to be recognized by most economists who seem to have placed greater emphasis on income accounts than on stock accounts. Indeed, students of economics have failed to visualize the vantage of combining position and income statements in their analytical work. It is clear that to use but one of the two statements to analyze an economy is at best a partial study. Moreover, the macroaccounting mechanism will become an incomplete system without a balance sheet. In the application of accounting to economics it should be pointed out that the national balance sheet alone cannot furnish all the information needed for national position analysis. For a penetrating study a combination with other branches of macroaccounting seems desirable, such as regional and sector balance sheets, national income accounts, input-output tables, moneyflows, and balance of payments. In order to explore fully the functions of national position statement, a series of statements covering a period of several years will give a more meaningful study than the use of any single statement.