Risk measures, Market-determined risk, Accounting-determined risk, Association study

The new ‘supershare’ securities proposed by Hakansson (1977, 1976) are subject to the same sort of rickless-hedge combinations as are other forms of secondary securities such as stock options. In consequence, the prices of supershares must, even in the absence of distributional assumptions, obey certain pricing relationships with each other and with the underlying primary security. When the primary security is assumed in addition to follow a geometric Brownian motion process, exact supershare valuation formulae of the Black-Scholes (1973) type are obtained. The ‘hedge portfolio algebra’ of Garman (1976) is employed to make the analysis concise.

Since early 1956 Citizens Utilities Company has had two classes of common stock which are virtually identical in all respects except dividend payout. One class pays only stock dividends, the other class pays only cash dividends, and the corporate charter requires that the dividends per share on the two classes be of equivalent value. Under an I.R.S. ruling granted to Citizens Utilities in 1955 and a ‘grandfather clause’ in the 1969 Tax Reform Act, the stock dividends are not taxable as ordinary income. (No other publicly held firm has such a ruling and, in general, the 1969 Act made stock dividends of this type taxable.) Given these circumstances, the price-dividend history of the Citizens Utilities shares provides a view of the effects of alternative payout policies which, to an exceptional degree, is free of confounding factors. Close examination of this history implies that, if anything, claims to cash dividends have commanded a slight premium in the market over claims to equal amounts (before taxes) of capital gains.

Christopher B. Barry, Effects of Uncertain and Nonstationary Parameters Upon Capital Market Equilibrium Conditions, The Journal of Financial and Quantitative Analysis, Vol. 13, No. 3 (Sep., 1978), pp. 419-433

The finance literature has devoted considerable attention to the study of yields, yield spreads, and rating classification for fixed income securities. In the corporate market, authors such as Hickman [6], Johnson [7], Sloane [9], and Van Home [12] have investigated the behavior of yields and yield spreads over time. Johnson found that the yield differential, defined as the corporate yield minus the equal maturity Treasury rate, was unrelated to maturity. Van Home found that this differential widened during recessionary periods; he interpreted this to reflect either a higher default probability or greater investor risk aversion. In his important paper published in 1959, Lawrence Fisher [4] employed cross-sectional data at five points in time to relate corporate yield spreads to four key variables which serve as proxies for default and marketability risks. Pogue and Soldofsky [8] extended Fisher's approach to explain not corporate bond yield spreads but rather bond ratings. As explanatory variables, Pogue and Soldofsky chose several measures of the firm's income and debt capacity.

central objective of this paper is to present a series expansion of nonlinear estimators in order to facilitate an analysis of the distributions of such estimators. Where the estimator under consideration is a maximum likelihood estimator, the method provides somewhat more information, as well as higher order approximations to the distributions of the nonlinear estimators than does the usual theory which demonstrates asymptotic normality. The method is also useful for a wide class of estimators including those defined only implicitly by the estimating procedure. Approximations to the distributions of the nonlinear estimators can be obtained in many cases even when the moments do not exist. In any event, it is to be hoped that the analytic procedures discussed in this paper will simplify the analysis of specific cases and will shed more light on the general formulation of nonlinear estimation problems. The remainder of this paper is in four sections. The first section presents the basic theory and analyzes the asymptotic distributions of nonlinear estimators in correctly specified models. This is followed in the second section by a brief discussion of a number of interesting examples. The third section compares the approach outlined in this paper with the traditional maximum likelihood and general nonlinear series expansions. In the fourth section the approximate asymptotic distribution of the regression residuals is derived. The general statement of the model to be considered in the following sections is given by:

A number of empirical studies would seem to cast doubt upon the neo-classical view of the supply side of an economy. Estimates of Cobb-Douglas production functions and the apparent procyclical movement of real wages would seem to contradict the assumption of diminishing returns to labor and the implication of neo-classical theory that factors of production are paid the value of their marginal product.' Recently, Lucas (1970) and Sargent and Wallace (1974) have outlined a theory that could reconcile these statistical results with a basically neo-classical view of supply relationships; essentially, they suggest that these paradoxical empirical observations are the result of specification error, of aggregating labor and wages over straight-time and overtime work shifts. This paper reports an attempt to evaluate empirically both the allegations against the neo-classical view and the Lucas-SargentWallace response within the context of the Canadian economy. In the first section, evidence concerning the diminishing returns to aggregate Canadian labor and the cyclical behavior of average real Canadian wages is presented. In the second, the effect of disaggregating labor is discussed. Conclusions will be found in the last section.

The bank financial management process involves assets, liabilities, and factors external to the bank and thus is multivariate. Because variables such as deposits, loans, or interest rates are often related with a time lag to another variable such as investments, the process is also dynamic. Although the research work of Aigner [1], Aigner and Bryan [2], Anderson and Burger [3], Bryan [6], Bryan and Carleton [7], Fraser and Rose [10], Hester and Pierce [13], and Melnik [14] has dealt with the multivariate aspect of the process, the consideration of dynamic properties in empirical work has been limited.

In a recent article in this Review, David lIevhari and Don Patinkin (hereafter noted L-P) develop an equilibrium growth model for a simple economy in which money is treated as a productive factor, entering an aggregate production function. In their policy section, they are unable to determine the effects of an increase in the exogenously determined rate of inflation on the equilibrium capital and real-balance intensities. They are also unable to establish whether or not steady-state equilibrium is stable. The purpose of this note is to extend their dynamic analysis and to show that 1) the effects of a change in the rate of inflation are more or less predictable, and 2) steady-state equilibrium can be expected to be stable. The L-P model can be briefly summarized. Assume a growing neoclassical economy where Y = G(K, M/P, N), and where Y, K, M/P, and N represent real output, the stock of physical capital, the real money stock, and the labor force, respectively. Assume further that G is linear homogeneous and twice continuously differentiable. The function can therefore be written y = g(k, m), where y, k, and m are Y/N, K/N, and M/PN, respectively. Assume g is wellbehaved such that gi > 0, gii 0. Let the labor force grow at some exogenously determined exponential rate n. Money is costlessly produced by the government and injected into the economy via transfer payments to the public. In order to avoid stability problems noted by Miguel Sidrauski, it is assumed that the rate of nominal expansion is altered by the government in order to maintain a constant target rate of inflation.' The rate of nominal expansion is u = DM/M, where D denotes the time derivative of the variable which follows it. The rate of inflation is p = DP/P. It follows that D(M/P) = (u p)M/P. From this and the labor force growth assumption, it follows that the rate of growth of the real per capita money stock is