Much of modern portfolio theory rests on conclusions drawn from the original form of the Capital Asset Pricing Model. Fundamental to the conclusions of this model is the assumption of perfect competition among investors; i.e., all investors possess approximately the same small amount of wealth such that equilibrium price cannot be influenced significantly by the demand of any of the investors. Today's security market, however, is characterized by individuals and large institutional investors such as insurance companies and investment funds. Although institutions represent a very small fraction of all investors in the market, institutional investors in 1977 held 34.3 percent of all outstanding stock. By the very magnitude of the dollar transactions effected by these large investors, prices can and are affected dramatically. Because today's security market is composed of investors exhibiting extreme differences in wealth, the United States securities market probably is not perfectly competitive as assumed in portfolio theory. Consequently, investment theory must be extended to reflect vast wealth differences among investors. To achieve this end, modifications are made to the original Capital Asset Pricing Model. Equilibrium conditions are examined and conclusions are drawn as to how portfolio theory must be altered to include price affecting ability by a segment of the investors in the market.

The objective of this study is to determine the impact of money market conditions and a bank's regulatory environment on the interest rates banks charge on their loans. This is accomplished through the analysis of the effect of these impacts, in a multiperiod framework, on a bank's optimal investment and borrowing decisions and the minimum required rate of return on its asset portfolio.

The algorithm leading to a solution of the above question has been known at least since Kaplan's 1965 tutorial [5] on Sturm's theorem. The Sturm-Kaplan method has the power to count all zeros on the real axis between any two specified limits. A significant problem may arise, however, when one tries to generate the Sturmian functions which play a central part in the Sturm-Kaplan method. The rather arduous nature of the task derives from the necessity to perform several polynomial (synthetic) divisions. As the number of cash flows involved in the analysis increases, the time and effort required to determine the Sturmian functions increase as well.

Tim S. Campbell, William A. Kracaw, Sorting Equilibria in Financial Markets: The Incentive Problem, The Journal of Financial and Quantitative Analysis, Vol. 16, No. 4, Proceedings of 16th Annual Conference of the Western Finance Association, June 18-20, 1981, Jackson Hole, Wyoming (Nov., 1981), pp. 477-492

Eric H. Sorensen, Clark A. Hawkins, On the Pricing of Preferred Stock, The Journal of Financial and Quantitative Analysis, Vol. 16, No. 4, Proceedings of 16th Annual Conference of the Western Finance Association, June 18-20, 1981, Jackson Hole, Wyoming (Nov., 1981), pp. 515-528