D UE to Sharpe (1964), Lintner (1965) and Mossin (1966), the Capital Asset Pricing Model (CAPM) has been employed to estimate systematic and performance measure and to predict the risk-return relationship. The predictive ability of this model has been examined by Friend and Blume (FB) (1973), Black, and Scholes (BJS) (1972) and Blume and Friend (BF) (1970). They have concluded that the empirical results obtained from the CAPM are significantly different from the ex ante expectation of this model. The effects of investment horizon on the estimate of the systematic were first investigated by (1969). Based upon the instantaneous systematic concept, he concluded that the logarithmic linear form of the CAPM can be used to eliminate the effects of time horizon on the estimated systematic risk; in other words, the basic specification for the CAPM is a Cobb-Douglas type functional form. Levy (1972) has shown that the assumption of a holding period that is different from the true investment horizon will lead to systematic bias of the performance measure index. Recently, Cheng and Deets (CD) (1973) have shown that the logarithmic linear form of the CAPM not only implies a linear relationship but produces an instantaneous risk, dependent upon the length of observed horizon.' In addition, they proposed a new instantaneous systematic entitled the Cheng-Deets instantaneous systematic risk to substitute for the Jensen instantaneous Neither nor CD has ever investigated the effects of finite investment horizon when market equilibrium is not instantaneous. The main purposes of this paper are to derive two alternative functional forms for the CAPM, which will explicitly include the investment horizon parameter, to improve the explanatory power of the CAPM, and to reduce the bias of the estimated systematic risk. In the second section the risk-return relationship is reexamined under the assumptions that true investment horizon is either observable or not observable. In the third section both likelihood ratio and constant elasticity of substitution (CES) function methods are proposed to derive a testable generalized CAPM in accordance with the assumption that all investors have identical investment horizons.2 In the fourth section models derived in the third section are related to Merton's (1970, 1973) continuous time models and Fama and Macbeth's (1973, 1974) empirical work, which supports the linearity of CAPM. In the fifth section, a set of sample data from the New York Stock Exchange (NYSE) during 19671972 will be employed to estimate the related parameters of the nonlinear CAPM being derived in this paper. In addition, the results obtained from nonlinear CAPM will be compared with those obtained from the linear CAPM. Finally, in the last section, the results of this paper will be summarized.

Tp wo forces, relatively unimportant several decades ago, have influenced the destiny of the consumer dollar in the years following the Second World War. The first of those forces is the growth of installment and mortgage credit relative to disposable income, and the second is the growth of contractual savings relative to the total amount of personal saving. It is argued in this paper that these two forces, even though stabilizing contractual savings and payments, have altered the pattern of nondurable goods consumption in certain undesirable ways. Since the end of World War II, the phenomenal rise in installment and mortgage credit and its possible de-stabilizing effect on the economy has been a subject of much discussion among economists. But in this paper, our attention is mainly directed to the neglected aspect of how durable goods financing has affected, surreptitiously, the consumption expenditures for nondurable goods and services and how the change may adversely affect the stability of the economy. The change is measured in this paper by comparing two periods the most recent decade, that is, the fifties, and the twenties, a decade selected for statistical convenience as well as for cyclical comparability. The relative importance of these two forces in the two periods and appropriate analytical framework are presented in Section I; the results of empirical investigations and tests are summarized in Section II; and policy implications are examined in Section III.

IN the August I947 issue of this REVIEW, Mr. Willard W. Cochrane, presenting a summary of his study about family budgets among Corn Belt farmers in the United States,' concluded that two different forces emanate from the income-outlay behavior of farm families: an explosive force associated with expenditures for capital and a stabilizing force associated with expenditures for family living.2 The character of farmers' expenditures as a whole, however, was not ascertained. Furthermore, the procedure seems doubtful.

Paul R. Gregory, John M. Campbell, Benjamin S. Cheng, A Simultaneous Equation Model of Birth Rates in the United States, The Review of Economics and Statistics, Vol. 54, No. 4 (Nov., 1972), pp. 374-380

A current trend among oil-producing nations with private oil sectors is to move toward tax systems that are based upon pr ofits rather than production. The authors present a case study of wha t can go wrong with profit-based tax schemes. They study the implemen tation of the net profit share leasing system in the United States in the early 1980s. They conclude that the information requirements of the scheme are heavy, perhaps prohibitive, and that the net profit sh are system can easily backfire if the informational requirements can not be met. The authors also show that the U.S. government misused th e limited amount of information that was available to it.

Using a unique and rich database of high-technology firms in China, we show that effective enforcement of intellectual property rights at the provincial level is critical in encouraging financing and investing in R&D. Better enforcement of intellectual property (IP) rights positively affects firms' ability to acquire new external debt and allows firms to invest in more R&D, generate more innovation patents, and produce more sales from new products. Our results suggest that facilitating financing and investing in R&D are the channels through which better IP rights enforcement can affect economic growth.

Nonexperimental data are used to evaluate impacts of a Bolivian preschool program on cognitive, psychosocial, and anthropometric outcomes. Impacts are shown to be highly dependent on age and exposure duration. To minimize the effect of distributional assumptions, program impacts are estimated as nonparametric functions of age and duration. A generalized matching estimator is developed and used to control for nonrandom selectivity into the program and into exposure durations. Comparisons with three groups—children in the feeder area not in the program, children in the program for ≤ 1 month, and children living in similar areas without the program—indicate that estimates are robust for significant positive effects of the program on cognitive and psychosocial outcomes with ≥ 7 months' exposure, although the age patterns of effects differ slightly by comparison group.

Search frictions and misallocation are common in decentralized transportation markets. Using novel trip-level data of taxis in Singapore, this paper examines the impactof real-time demand information at airport terminals on search frictions. The in-formation reduces taxi supply misallocation, increasing deadheading speed by 16.3%and decreasing deadheading time by 10.77%, benefiting both passengers and drivers.It raises daily earnings by $3.70 USD and adds 6.2 minutes of operational time perairport-trip taxi. Spatial spillovers are primarily observed among drivers in adjacentdistricts. Taxis from the Budget Terminal and drivers with fewer prior airport pickups benefit more from this information.