This paper examines cross-sectional analysis procedures common to many market-based accounting research papers. Both the economic and econometric properties of ‘levels’ and ‘returns’ studies are discussed. Topics covered include the relations between the accounting studies and cash flow valuation models, the role of expectations of accounting variables, deflators, spurious inference, risk adjustment and its relation to growth, size and leverage, residual dependence, dependence among explanatory variables, and the effect of scale differences across firms. Major conclusions are that market value is the correct deflator in returns studies, and that levels and returns studies are economically but not econometrically equivalent.

In this paper I examine the effect of the current social security system on the structure of compensation that a wealth-maximizing worker selects. I show that the current method of benefit determination encourages an upward-sloping wage profile and that the social security system alters the mix of wage and pension payments. In addition, the intragenerational transfers of the social security system alter the level of investment in human capital. As a result, the social security system reduces the disparity of income within the economy.

An employer must choose a procedure for screening job applicants, a rate of hire, a training program for new employees, a criterion for the retention of new employees after observing their on-the-job performance, a compensation package, and a rate of capital investment so as to minimize production costs across time. This paper examines the effects of employer size on these hiring and training decisions when larger employers have greater monitoring costs. A unique data set is employed to estimate the empirical relation among employer size and employer search, training, capital investment, and wages.

A model of unemployment duration is estimated with weekly micro data on Canadian men. Ent itlement provisions in the unemployment insurance program and demand conditions are found to have a significant effect on the probability of leaving unemployment. The probability of a worker leaving unemploy ment declines with the duration of unemployment, holding unemployment insurance entitlement constant. When entitlement is allowed to vary, the probability of leaving first falls and then generally rises with unemployment duration. These results are robust with respect to allo wing for person-specific unobserved heterogeneity and alternative spe cifications of duration dependence. Copyright 1987 by University of Chicago Press.

This paper evaluates the power of multivariate tests of the Capital Asset Pricing Model. The results indicate that when employing an unspecified alternative hypothesis, the ability of the tests to distinguish between the CAPM and other pricing models is poor. An upper bound is derived for the distance the alternative distribution of the test statistic can be from the null distribution when the deviations from the CAPM are due to missing factors. This upper bound explains the low power of the tests.

Abstract. This paper reconsiders certain issues raised by Beaver and Demski (1979) regarding the nature of income measurement. Three points are made. First, it is argued that income measurement cannot, and should not be, abandoned. Second, the discussion emphasizes that the (social) usefulness of information does not depend on stockholder unanimity, the optimality of income maximization, and the structure of markets (such as complete markets). As a corollary, no apparent reasons suggest that any of the latter conditions rule out income measurement as providing useful information. Third, the paper shows how one links economic efficiency to income measurement within a standard neoclassical framework. This linkage is of interest because it is weaker than the relationship between income maximization and stockholder unanimity. The analysis contrasts stockholder unanimity theory to efficiency theory. Résumé. Cet article examine certaines questions déjà soulevées par Beaver et Demski (1979) en ce qui concerne la nature de la mesure du bénéfice. Trois points sont soulignés. Premièrement, il est soutenu que la mesure du bénéfice ne peut et ne doit être abandonnée. Deuxièmement, la discussion insiste sur le fait que l'utilité (sociale) de l'information ne dépend ni de l'unanimité au niveau des actionnaires, ni du caractère optimal de la maximisation du bénéfice, ni de la structure des marchés (comme les marchés complets). Comme corollaire, il n'existe pas de raisons apparentes laissant supposer qu'une quelconque des conditions précédentes empêche la mesure du bénéfice de générer de l'information utile. Troisièmement, l'article montre comment il est possible, dans un contexte néo‐classique normal, de lier l'efficience économique à la mesure du bénéfice. Ce lien s'avère des plus intéressant d'autant qu'il est plus faible que celui existant entre la maximisation du bénéfice et l'unanimité des actionnaires. L'analyse oppose la théorie de l'unanimité des actionnaires à la théorie de l'efficience.