N 1970 Baumol, Heim, Malkiel, and Quandt (hereinafter BHMQ) published a provocative article. Their hypothesis was that for U.S. firms the rate of return from invested funds would be greatest when the financing involved the most serious exercise of market discipline. On these grounds they conjectured that borrowing would tend to produce significant increases in earnings but not as great as those associated with new stock issues, and that the rate of return to plowback would be the lowest of the three. BHMQ's empirical tests led them to the following conclusions:

Statistical analysis of commodity futures prices and, indeed, of speculative prices in general has largely been carried out on the assumption that prices or first differences of prices are covariance stationary. Examples of this abound in the literature, the best known probably being parametric tests of the random walk hypothesis (see, for example, Stevenson and Bear, 1970) and studies of individual behaviour in futures markets (see, for example, Telser, 1967). This assumption of stationarity implies, of course, that the possibility of non-constant variance of the process generating prices is not admitted. On the surface this may not appear to be a severe constraint, but Samuelson (1965) has proposed a model of futures price formation in which prices become increasingly volatile as the expiry date of the contract draws nearer. On the other hand, little empirical evidence is available to enable judgment to be made on the plausibility of the assumption of constant variance. The purpose of this note is to suggest that, in Samuelson's model, a law of increasing price volatility may not generally hold. This proposition is examined in section II. In section III some of the difficulties associated with the testing of hypotheses about price variability are discussed and in section IV evidence is presented from several futures markets.

G. O. Gaudet, J. D. May, D. G. McFetridge, Optimal Capital Accumulation: The Neoclassical Framework in a Canadian Context, The Review of Economics and Statistics, Vol. 58, No. 3 (Aug., 1976), pp. 269-273

Norman D. Aitken, Robert S. Obutelewicz, A Cross-sectional Study of EEC Trade with the Association of African Countries, The Review of Economics and Statistics, Vol. 58, No. 4 (Nov., 1976), pp. 425-433