Knowledge that Transforms

THE BEHAVIOR OF COMMODITY MARKETS has been a subject of extended controversy among economists. Much of this controversy revolves around the underlying behavior of futures prices over time. A number of researchers have concluded that there are no systematic patterns to futures price behavior while others maintain that while there may be a priori reasons justifying behavior, the application of certain mechanical filter rules often leads to substantial profits which is indicative of nonrandom behavior. It is likely that professional attention in commodity markets will increase in the future given their current newsworthiness1 along with their similarity to bond markets. Recent contributions by R. Roll [23] and T. J. Sargent [25] emphasize this latter point. In fact, many of the specific theories of commodity price behavior and term structure phenomena between interest rates can be seen as special cases of a more general model of an efficient capital market. This model has also been suggested as a rationalization of the Fisherian relationship between interest rates and price changes [22]. Studies dealing with the underlying mechanism of futures price behavior include, inter alia: Cargill and Rausser [5, 6], Gray [10, 11], Hardy [12], Houthakker [13], Kendall [15], Keynes [16], Labys and Granger [17], Larson [18], Leuthold [19], Mandelbrot [20], Samuelson [24], Smidt [27], Stevenson and Bear [28], and Working [31, 32, 33]. While this list is in no way exhaustive, it does represent the broad range of studies on commodity markets. Much of the above work on commodity markets can be classified in one of three areas. First, numerous attempts [5, 6, 15, 17, 18, 19, 27, 28] have been made to test the so-called random walk model by statistical

The last decade has witnessed significant advancements in capital theory and its application to corporate finance, investment policy, and portfolio analysis. More recently a growing body of empirical work has undertaken the task of systematically testing the positive implications of the theory. The study of risk has occupied a central position in this endeavor as it provides the link between the various branches of finance theory. The purpose of this paper is to investigate the empirical determinants of equity risk through the analysis of the firm's underlying characteristics, specifically, the firm's size, its financial leverage, and its dividend record. Section I summarizes the literature, Section II provides the theoretical framework, Section III describes the empirical model and the data, Section IV presents the statistical results, Section V analyzes the effect of excluded variables, and Section VI provides a summary and conclusions. I. Empirical Literature on Risk The following survey is not exhaustive; it intends to trace the direction

Hot markets, which refer to instances when stocks increase their offering prices to a level greater than average market premiums, have been overlooked in recent academic literature. Thus, this research examines factors which may aid in the prediction of hot issue markets. A sample of unseasoned stock issues offered between January 1, 1960 and October 31, 1970 is compiled, noting the stock's original offering price and their first two months' ending bids. In order to understand overall market performance during this time, data was also collected from the daily Standard & Poor 500 (SP the correlation between new issue premiums and aftermarket performance; the association between the number of monthly new offerings and simultaneous new issue premiums; and finally the correlation between new issue premiums and past market performance. Several implications for investors, issuers, and researchers are presented, as are directions for future research. The findings indicate that a level of predictability exists within the first month's residuals, which has implications for the timing of offerings and new issue purchases. A higher offering price, when compared to a cold issue market's efficient prices, may be obtained by issuers during that first month's issuance. (AKP)