Knowledge that Transforms

Analysts forecasts, Interim reporting, Time-series, Analyst forecast revisions

Lawrence D. Brown, Michael S. Rozeff, Univariate Time-Series Models of Quarterly Accounting Earnings per Share: A Proposed Model, Journal of Accounting Research, Vol. 17, No. 1 (Spring, 1979), pp. 179-189

THIS PAPER IS a preliminary investigation of dynamics under uncertainty. We attempt to develop a general approach to the continuous time stochastic processes that arise in dynamic economics from the maximizing behavior of agents. The analysis builds on recent results of Bismut [2, 3] concerning the characterization of the extrema of stochastic variational problems over a finite horizon and on our own investigations [6, 7, 20, 21] of the stability properties of the equations of dynamic economics.2 We consider a class of discounted infinite horizon maximum problems. While it is convenient to pose the basic economic problem as a stochastic control problem, to obtain the full benefit of Bismut's elegant characterization of a maximizing process it is convenient to transform this problem into an equivalent stochastic variational problem along the lines indicated by Rockafellar [27] in the deterministic case and generalized by Bismut [2] to the stochastic case. Within this framework we show that the idea of a competitive path introduced in the continuous time deterministic case in [21] generalizes in a natural way in the case of uncertainty to a competitive process. We show, under a concavity assumption on the basic integrand of the problem, that a competitive process which satisfies a transversality condition is optimal under a discounted catching up criterion (Section 2). In Section 3 we examine the sample path properties of a competitive process. If for almost every realization of a competitive process the associated dual price process generates a path of subgradients for the value function, we call the process McKenzie competitive, since it was McKenzie [22] who first recognized the importance of this property in the deterministic case. We show that two McKenzie competitive processes starting from distinct nonrandom initial conditions converge almost surely if the processes are bounded almost surely and if a certain curvature condition is satisfied by the Hamiltonian of the system. The earlier convergence result extensively studied in the deterministic case thus continues to hold in the stochastic case. The problem of finding sufficient conditions for the existence of a McKenzie competitive process remains an open problem. Section 4 examines the long-run behavior of the probability measure associated with a competitive process. We give conditions under which a McKenzie competitive process is a Markov process with an invariant probability measure and

Ever since Antonelli noted ([ 2], [3]) the "integrability" (symmetry) conditions necessarily obeyed by an indirect demand function derived from maximizing a utility function, and ever since Volterra emphasized ([37], [38]) their importance to Pareto's attempt [23] to construct utility from consumer purchase data these conditions have retained a technical character eluding intuitive motivation.It is our purpose here to show that an axiom of Ville ([35], [36]) provides an intuitively appealing equivalent of these symmetry conditions.In doing this, with the help of our integrability theorem of [16], we will extend Ville's result and, we hope, clarify his very important contribution to axiomatic consumer theory.lFrom the dual versions ([27], Theorems 16 and 18) of an extension of Hurwicz and Uzawa's Theorems 1 and 2 [17], we know, roughly speaking, that the following two conditions together are equivalent to utility-rationality2 of a given C 1 competitive inverse demand function satisfying the budget identity: negative semi-definiteness of the Antonelli matrix 11.5) below), and symmetry of the Antonelli matrix.From duality theorems ([27], Theorems 20 and l2(b) applied to a recent result of Kihlstrom, Mas-Colell, and Sonnenschein ([19], Theorems 1 and 2), we know that the first (negative semi-definiteness) condition is equivalent to a weak version of the intuitively appealing Weak Axiom of Revealed Demand Preference. 3 What about the second condition, the

[This article considers an economy in which there is one public good financed by means of commodity taxes (lump sum transfers being not available). The first part of the paper is devoted to the study of tax equilibria. Sufficient conditions for the existence of an equilibrium with respect to a given tax system are given. When the tax system is modified, the structure of the corresponding set of tax equilibria is analyzed, and continuity properties of equilibria (with respect to the tax system) are stated. In the second part, attention is focused on the Pareto ranking of tax equilibria. In a given equilibrium, the directions of policy tools changes for a Pareto improvement (if any) are characterized. The "size" of the set of second best Pareto optima in the set of tax equilibria is evaluated.]

Benjamin M. Friedman, V. Vance Roley, Investors' Portfolio Behavior under Alternative Models of Long-Term Interest Rate Expectations: Unitary, Rational, or Autoregressive, Econometrica, Vol. 47, No. 6 (Nov., 1979), pp. 1475-1497

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