MILTON FRIEDMAN AND ANNA SCHWARTZ Monetary Trends reports a great many findings-53 are enumerated in the introduction-but paramount is the stability of the demand for money in the US and Britain over the past century. The money stock controls money income. This proposition more than anything else is the point of their painstaking investigation. Friedman and Schwartz argue against what might neutrally be called the early post-war view of the macroeconomic role of money: Velocity will move easily to reconcile any level of nominal income to any money stock. The demand for money in this view is a will-o'the-wisp, as the authors put it. Monetary policy has little influence over real activity; stabilization policy necessarily relies on fiscal instruments. The volume is completely convincing in disposing of this idea; today's reader is likely to be puzzled why so much space is devoted to a view that has no serious adherents among professional economists. Friedman and Schwartz are generals fighting an earlier war, a situation accentuated by the long lags in putting this volume into print. Though the opposing armies fighting for the early postwar view have withdrawn in total rout, a new front has opened up, and the quantity theory is fighting for its life once again. Worse yet, the new armies are fighting under the banner of free-market economics and are led by former colleagues and students of Milton Friedman. The midwest, once the stronghold of the quantity theory, is now largely occupied by the enemy. The new monetary economics views the quantity theory as nothing more than an artifact of government regulation. An economy organized along free-market principles could function without money at all (Fischer Black, 1970). It is true that the kinds of monetary regulations imposed by the American and British governments of the past century create a more-or-less stable relation between a certain class of assets called money and nominal spending (Eugene Fama, 1980), but different regulations would alter that relation. Even the real bills doctrine, anathema to quantity theorists because it invites unlimited expansion of the money supply, has advocates in the new school (Thomas Sargent and Neil Wallace, 1981). monetary system where the government is unconcerned about the money stock has been advocated by a University of Chicago economist while visiting the Hoover Institution (John Bilson, 1981). Restoring the intrinsic value of money, not limiting its quantity, has been found to be the key to successful disinflation by one member of this group (Sargent, 1982). critical summary, titled A Laissez Faire Approach to Monetary Stability, written * See p. 1528, above, for publication information.

Robert E. Verrecchia, The Use of Mathematical Models in Financial Accounting, Journal of Accounting Research, Vol. 20, Supplement: Studies on Current Research Methodologies in Accounting: A Critical Evaluation (1982), pp. 1-42

Accounting changes, LIFO, Market response, Annual earnings announcements

Accounting Research, Causality, Research methods, Cross-lagged technique

Auditing, Non-Audit services, Auditor independence, Audit quality

This paper examines the relationship between the ownership control status of firms and the accounting methods they adopt. The arguments of Watts and Zimmerman's positive theory are integrated with those of managerial economists to generate the prediction that management controlled firms are more likely than owner controlled firms to adopt accounting methods which increase reported earnings. This prediction is inconsistent with Fama's hypothesis that the market for managerial talent will prevent management controlled firms from acting differently than owner controlled firms. This paper compares the depreciation methods used by a sample of management and owner controlled firms for financial reporting purposes. The comparison considers and controls for the factors of firm size, leverage, and the depreciation method used for tax reporting purposes. The comparison reveals that there is a significant difference in the depreciation methods adopted by management controlled and owner controlled firms for financial reporting purposes.

This study tests Chicago Board Options Exchange efficiency by examining option price behavior in the weeks surrounding a firm's quarterly earnings announcement. The evidence presented here suggests that a first-order autoregressive seasonal process describes quarterly earnings behavior and demonstrates that the information content of an earnings announcement is fully incorporated in option prices by the end of the announcement week.

The performance of Value Line Investment Survey recommendations made between 1965 and 1978 is evaluated by applying a future benchmark technique. The future benchmark technique avoids selection bias problems associated with using historic benchmarks as well as known difficulties of using Capital Asset Pricing Model benchmarks. Potential problems (implicit in the technique) are discussed and resolved within the conduct of the experiment. Results indicate statistically significant abnormal performance when future benchmarks are computed using a market model.