The familiar two-parameter model for portfolio decisions, attributed to Markowitz [11], has individuals maximizing an objective function, ϕ [E(Y), V(Y)], of mean and variance of end-of-period wealth, subject to a constraint imposed by initial wealth. In the usual version there is an arbitrary number, n, of risky assets with stochastic end-of-period values (price plus dividend) represented by the vector X with exogenously given mean vector μ and nonsingular variance matrix σ. There is also one riskless asset, whose certain end-of-period value per dollar invested is p. Final wealth, as constrained by initial wealth, W, is given by Y = WP + a' (X – OP), where a and P are vectors of risky asset quantities and prices. Assuming ϕE > 0 (wealth preference), ϕV

Dennis W. Draper, Discussion: Information Sets, Macroeconomic Reform, and Stock Prices, 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. 511-513

In this paper prices of corporate bonds are decomposed into elements associated with (1) the pure price of time, (2) the default risk of the agency rating class to which the bond is assigned, and (3) the unique risk and ancillary features of the bond itself.

The measures of risk proposed by Vinso are properly motivated with a concern for the dynamic nature of a firm's operations. The measures are subject to restrictions in application and interpretation, however. Some of these restrictions were caused by the choice of the Cornish-Fisher expansion to incorporate the adjustment for skewness and the resulting quadratic equation. The problems created by the existence of multiple real or imaginary roots to this equation are unresolved in the paper.Apart from these problems, the measures do not represent probabilities of ruin; they often significantly understate the true probability. We have shown that the measures related to εrp are applicable only to firms with positive-drift processes and argue that they should be evaluated in a multivariate context.

Earl D. Benson, David S. Kidwell, Timothy W. Koch, Robert J. Rogowski, Systematic Variation in Yield Spreads for Tax-Exempt General Obligation Bonds, The Journal of Financial and Quantitative Analysis, Vol. 16, No. 5 (Dec., 1981), pp. 685-702