T HE model presented in this paper is a system of recursive linear regression equations, the parameters of which are esti-mated from monthly series of data covering the

Detailed comparisons of the performance of the alternative theories of corporate investment are given in Jorgenson and Siebert (1968, Tables 2, 4, and 5). 2 Equivalence between maximization of the market value of the firm and maximization of profit at each point of time is discussed by Malinvaud (1953) and, more recently, by Arrow (1964).The essential idea is implicit in Haavelmo's theory of investment (1960).II23 * Mean annual gross investment for the postwar period, 1946-1963, in billions of 1954 dollars.t End-of-year net fixed assets for 1961 in billions of 1954 dollars.