Comments on a suggested alternative method based on the distributed lag form of adaptive expectations for estimating the parameters of the partial adjustment and adoptive expectations model. Potential problems of the alternative estimation procedure; Overview of the estimates of parameters by the suggested iterative ordinary least squares method; Findings of the regression model for the partial adjustment coefficient estimates.

[This paper analyzes the adjustment processes of financial ratios in the presence of costly adjustment and information uncertainty. The paper proposes a generalized partial adjustment-adaptive expectations model to characterize dynamic financial ratio adjustment processes. The proposed model incorporates the persistence of changes in industry averages into the process of financial ratio adjustment. The Gauss-Newton nonlinear regression method is used to estimate the structural parameters of the generalized model. Results show that adjustment to target ratios is not instantaneous. Results also show that there are differences in the patterns of ratio adjustment for firms in different industries with different sizes.]

Cheng F. Lee, Manak Gupta, An Inter-Temproal Approach to the Optimization of Dividend Policy with Pre- Determined Investment: A Further Comment, The Journal of Finance, Vol. 32, No. 4 (Sep., 1977), pp. 1358-1361