The objective of this paper is to carry out tests of the general hypothesis, most recently urged by Scherer [14, pp. 100–102] and Weston and Brigham [17, p. 689], that the cost-of-equity capital of small industrial corporations is greater than that of large industrial corporations. The paper denotes this cost as ke and defines it as the expected rate of return on the stock of a company when the current price of the stock is in equilibrium. A common designation of ke of course is the equity capitalization rate. It will be noted that this definition of the cost-of-equity capital abstracts from the flotation costs that are usually incurred when companies sell new stock. Archer and Faerber [2] have already shown that these costs are inversely related to the size of companies.

Despite apparent implications of normative portfolio theory for portfolios that incorporate a wide variety of marketable security forms, most of the literature concerned with application or empirical testing of the theory has considered portfolios composed only of common stocks, cash, and the proverbial riskless bond. However, nonequity securities constitute a significant component of investors' total financial wealth, and broadly diversified securities portfolios are commonplace. The objectives of this paper are to examine the risk characteristics of 19 classes of long-term marketable securities, ranging from U.S. government bonds to speculative common stocks, and to explore some implications of these characteristics for diversification of actual securities portfolios. The first section presents some risk measures for these security classes which are derived from ex post holding period return data for the 18 years, 1951–1968. This section includes an appraisal of the efficacy of alternative approaches to the generation of the matrix of interrelationships among the returns of broad types of securities. The second section utilizes the ex post risk measures to explore the composition of minimum risk portfolios consisting of two types of marketable securities, and the final section considers the question of appropriate media for the efficient diversification of common stock portfolios.

It has been a pleasure and a worthwhile experience to serve as President of the Western Finance Association (WFA) and to have had the opportunity to work with its officers and committee chairmen over this past year. In the brief history of the Association, our organization has come a long way in becoming firmly established due to the strong interest of its members and to the dedicated support of its officers and working committees. I wish to take a few moments to publicly acknowledge the services of a few who have given vital support to the activities of the Association during the past twelve months.

Journal Article Afriat and Revealed Preference Theory Get access W. E. Diewert W. E. Diewert University of British Columbia Search for other works by this author on: Oxford Academic Google Scholar The Review of Economic Studies, Volume 40, Issue 3, July 1973, Pages 419–425, https://doi.org/10.2307/2296461 Published: 01 July 1973

The purpose of this note is to correct an error in my paper [1]. Under the assumptions of the paper, Proposition 3 is not, in general, true. The point at which the proof goes awry is in the use of the mapping n. n is treated in the paper as if it were a function (i.e. a point to point mapping); whereas it is in fact a correspondence (a point to set mapping). n maps points of the unit simplex into itself, using a subset of the Pareto optimal set to obtain the simplex. A given point in the payoff space may be the image of more than one point in the strategy space. Each strategy, s, which maps into a given point in the Pareto optimal set (i.e. which has a given p associated with it in the simplex), can map into a distinct (j in the simplex. Thus the Brouwer theorem cannot be used. While n is surely upper semi-continuous, it need not have convex image sets, ruling out use of the Kakutani fixed point theorem. Furthermore, it need not be lower semi-continuous, ruling out another route to the use of the Brouwer theorem. That route is to use the results of E. Michael [2], which establish that if n is lower semi-continuous, then it has a selection which is a continuous function from the unit simplex into itself. The upshot is that the axioms of [1] must be somehow strengthened in one of the

Business failure, Bankruptcy, Prediction model, Adjusted Cash

Jarrod W. Wilcox, [Discussion of a Prediction of Business Failure Using Accounting Data]: A Reply, Journal of Accounting Research, Vol. 11, Empirical Research in Accounting: Selected Studies 1973 (1973), pp. 188-190

This paper reports on some mathematical and analytical properties of a static nonlinear model of a national economy or, more generally, of a multisectored economy. The model is a nonlinear version of the well-known linear input-output model of Leontief. Conditions are given for the nonlinear model to be workable in the sense that (i) there is a unique nonnegative vector of output production levels for each nonnegative final-demand vector, and (ii) the vector of output levels depends in a certain reasonable manner on the finaldemand vector. Attention is also focused on several other properties of the model of economic interest. For example, it is shown that propositions completely analogous to the LeChatelier-Samuelson principle in both the weak and strong forms for workable Leontief systems are valid within the context of the nonlinear model.

COMPARISONS of the extent of poverty at different times are greatly affected by whether the dividing line between the poor and the rest of the population changes as average income grows over time, and if so to what degree.1 The absolute income standard and the relative income standard are polar hypotheses about the income elasticity of the poverty line. Under an absolute standard of poverty, the poverty line is constant (in deflated dollars). In terms of what people thought of as poverty a century ago, the absolute standard implies that today almost no one is poor in the United States. Under a relative standard of poverty, the poverty line changes in the same proportion as average income if the relative income distribution is constant. The relative standard implies that if the shape of the income distribution is the same today as a century ago, the poverty problem is now no less.2 Probably more likely than either of these extremes is that people's judgment about the dividing line between poverty and a more adequate standard of living is determined by a mixture of concerns over both absoluteand relative conditions.3 If so, growth in average income increases the poverty line, but by less than in the same proportion. This proposition -that the income elasticity of the poverty line is between zero and one-is the hypothesis tested in this paper. I Time Series Analysis of Gallup Poll Results